News Column

DFC Global defends its proposed sale

May 28, 2014

By Chris Hepp, The Philadelphia Inquirer



May 28--Stung by a negative reaction from the Institutional Shareholder Services (ISS), DFC Global Corp., a payday and pawnshop lender based in Berwyn, defended its proposed sale to a Dallas private-equity firm Tuesday.

DFC, in a release, contended the $9.50 per share offer from Lone Star represented a fair price given that DFC Global has cut its predicted cash earnings this year from as much as $240 million in August to $156 million presently.

"The true premium of the offer is dramatically understated because it was announced concurrent with the company's third downward revision in the last 12 months," DFC said.

The stock's market price remains vulnerable as well to the shifting regulatory landscape in the United Kingdom, which is DFC's biggest market with 596 locations and accounts for 47.5 percent of DFC's revenue.

That vulnerability further supports the $9.50 per share offering from Lone Star, the company contended.

DFC announced its sale to Lone Star for $366.5 million on April 2. The transaction, which requires regulatory and shareholder approval, is expected to close in the July-September quarter.

The $9.50 buyout price represented a 5.8 percent premium over DFC's stock price the day the sale was announced. The sale price is well below the stock's recent high of $16.35 in August, before DFC warned that its fiscal 2014 results would be lower than in the previous year.

The ISS last week gave the deal a negative rating for stockholders.

"DFC Global strongly believes that ISS reached the wrong conclusion in failing to recommend that stockholders vote 'FOR' the acquisition of DFC Global by Lone Star," DFC said in its release.

In particular, DFC contended the ISS failed to give proper weight to the company's flagging fortunes over the past year, which had led to a 46 percent drop in the stock's price over the year preceding the sale announcement.

DFC contends that the stock price since has been propped up by the potential sale. Further, the company said the sale offer represented an 8.3 EBITDA multiple, higher than the 6.1 multiple of other recent transactions involving similar companies.

"Lone Star's proposal would allow DFC Global stockholders to recognize significant, immediate and certain cash value for their investment, transferring all risks and regulatory uncertainty to Lone Star," DFC said.

DFC closed at 9.29 Tuesday, down 0.09.

chepp@phillynews.com

215-854-2594

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Source: Philadelphia Inquirer (PA)


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