Europe’s Top Debt Collector Says $2 Billion Deal Not Enough

Updated on
  • Intrum Justitia CEO says Lindorff merger won’t halt investment
  • Sees upside potential to its post-Lindorff EPS growth estimate

Intrum Justitia AB says a decision this month to merge with Norwegian rival Lindorff doesn’t mean its acquisition spree is over as Europe’s biggest debt collector plans to keep buying credit management companies and debt portfolios.

Chief Executive Officer Mikael Ericson says he won’t let the current merger process take his focus off the existing business and “the agenda we have.” In an interview in Stockholm on Wednesday, the CEO said “we don’t feel that we in any way, as Intrum Justitia or as the combined company, need to lower the pace of investments.”

Intrum Justitia shares rose 3.4 percent to 296.3 kronor as of 11:53 a.m. in Stockholm, giving the company a market value of 21.4 billion kronor ($2.3 billion).

Intrum Justitia’s strategy involves growing by buying credit management companies as well as debt portfolios from corporate clients and banks. Ericson outlined his vision in May, after just three months on the job, saying the company may purchase 2 to 4 small and mid-sized firms on average each year, and leaving the door open to more ambitious takeovers than Intrum had chased previously.

On Nov. 14, Ericson announced that Intrum would acquire Lindorff in a 17.9 billion-krona deal. The news drove Intrum’s shares up as much as 37 percent -- the most in its 14-year history as a listed company -- to end the day almost 8 percent higher.

Upside Potential

The two companies expect 800 million kronor of annual cost synergies, fully phased in after three to four years, which will help Intrum Justitia’s earnings per share grow more than 75 percent on a cumulative basis after that time. Ericson sees upside potential to that estimate.

“If we manage to raise the income levels higher, or extract more than 800 million kronor in synergies, then the value increase per share will be higher,” Ericson said. “We’re very comfortable with the numbers we presented and can say that the possibility is rather on the upside, than any risk on the downside.”

The combined group will “continue to invest in our portfolios, continue with M&A activity and continue to develop and drive growth in this market,” he said. Expansion could “be about new geographies, such as 1st Credit in the U.K., but also about broadening asset classes.”

The company last month acquired a non-performing secured debt portfolio in Hungary for about 62 million euros ($66 million), expanding its purchased debt business for consumer unsecured receivables to adjacent asset classes.

Earlier this month, Intrum bought 1st Credit, a mid-sized purchased debt company in the U.K., for 130 million pounds ($161 million). That marked the Swedish company’s entry into the U.K. market, where it had previously only owned a few debt portfolios. Britain accounts for some 30 percent of all sold debt portfolios in Europe, so it’s “an incredibly exciting market,” Ericson said.

“We hope we can give 1st Credit the push it needs to grab a bigger share of the U.K. market and our ambition in the longer term is to be market leading in the U.K., which we aim for in all markets we enter,” Ericson said.