Acquisition

RNS Number : 0062B

Paragon Group Of Companies PLC

02 October 2015

 



RNS ANNOUNCEMENT

2 October 2015

THE PARAGON GROUP OF COMPANIES PLC

ACQUISITION

The Board of The Paragon Group of Companies PLC ("Paragon"/"the Group") is pleased to announce that its subsidiary company, Paragon Bank PLC ("Paragon Bank"), has agreed to acquire the entire share capital ("the transaction") of Five Arrows Leasing Group Limited ("Five Arrows Leasing") for £117 million.  Five Arrows Leasing is currently owned by Five Arrows Leasing Holdings Limited, which is part of Rothschild & Co.

Five Arrows Leasing was formed in 1988 and has been owned by Rothschild & Co since 1996.  It offers a range of asset finance products, through its subsidiary brands, to UK SMEs, including equipment, vehicle and construction equipment finance and is also a provider of lease servicing. 

At its last audited balance sheet (31 March 2015), Five Arrows Leasing had assets of £245.1 million financed by £42.9 million of shareholders' funds and a £178.0 million loan from Rothschild & Co.

In the year to 31 March 2015, Five Arrows Leasing made a pre-tax profit of £10.2 million and profits after tax of £8.1 million.  From 2010 to 2015, Five Arrows Leasing achieved a 17.6% compound annual growth rate in receivables balances.  The completion mechanism for the transaction is based on the 31 March 2015 balance sheet.  This transaction is expected to complete by 3 November 2015, when the equity consideration will be paid by Paragon Bank and the inter-company debt refinanced via Paragon Bank's retail deposits.  Five Arrows Leasing's loan book currently stands at around £240 million financed by a £193 million loan from Rothschild & Co.

Financial effects

The acquisition is expected to be enhancing to earnings and return on equity in the Group's 2016 financial year.  In addition, it will take Paragon Bank from its expected break-even level in 2016 to profitability.  The acquisition will not change the Group's stated dividend policy.   Had the transaction taken place at the 31 March 2015 balance sheet date, the Group's core tier 1 ratio would have been reduced to 17.0% from 19.5%.

People and management

The Five Arrows Leasing team is highly regarded, has a strong credit ethos and will have a strong cultural fit within the wider Paragon business.  Five Arrows Leasing will form the basis for further SME finance development within Paragon Bank and it will be re-branded in the near future to reflect its change in ownership.

Strategic rationale

Paragon Bank was authorised in February 2014 and was established to provide diversification of funding sources and income streams for the Group.  In addition to its successful savings programme, Paragon Bank intends to deliver a range of offerings in the UK mortgage, consumer lending and SME markets over the coming years through a combination of organic and acquisitive developments.    

Nigel Terrington, Chief Executive, said: "I am delighted that we have acquired Five Arrows Leasing, a business we have admired for many years as a market leader in the asset finance sector. The acquisition provides the opportunity to continue pursuing our strategy of diversifying the Group's income streams, building strong and sustainable earnings growth and enhancing our return on equity.

"The Five Arrows Leasing culture, philosophy and operating model is an excellent fit with the Group and we look forward to working with their management team and to supporting growth opportunities across the SME markets."

Paragon's results for the year to 30 September 2015 will be announced on Tuesday 24 November 2015.  Trading for the period to 30 September 2015 was in line with expectations. 

For further information, contact:

Paragon
Nigel Terrington, Chief Executive                            Tel: [phone]

Richard Woodman, Group Finance Director         Tel: [phone]

Deborah Bateman, External Relations Director   Tel: [phone]

Fishburn
Del Jones / Dominic Pendry                                        Tel: [phone]

Notes

The Paragon Group of Companies PLC

The Paragon Group of Companies PLC, established in 1985, is best-known as the UK's leading specialist buy-to-let lender and consumer finance group.  A FTSE 250 company, the Group has over £10 billion of assets and has serviced over 1.5 million customers.

Paragon Bank

Paragon Bank is a British bank offering savings and loans to customers in the UK. Paragon Bank's savings products are offered direct to customers online, backed up with expert support from a free phone call centre based in the UK. Paragon Bank's lending products are focused in car finance, personal loans and buy-to-let mortgages and are distributed through intermediaries.

Launched in February 2014, Paragon Bank is a wholly owned subsidiary of The Paragon Group of Companies, based in Solihull in the West Midlands. Established in 1985, The Paragon Group of Companies is best known as the UK's leading specialist buy-to-let lender and consumer finance group. The Group has over £10.5 billion of assets under management and currently services over 400,000 customer accounts across its three main markets - lending, loan portfolio acquisition and savings.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551.

Rothschild & Co

Rothschild & Co operates in the following areas:

·   Global Financial Advisory provides advisory services for mergers and acquisitions, debt financing and restructuring, and equity capital markets

·   Wealth & Asset Management

·   Merchant Banking which comprises third party private equity and private debt business and proprietary investments

Rothschild & Co is a French partnership limited by shares (société en commandite par actions) with a share capital of €142,274,072.  Paris trade and companies registry 302 519 228.  Registered office: 23 bis avenue de Messine, 75008 Paris, France.  Rothschild & Co shares are PEA-PME eligible.

 

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