DLLR Dfc Global Corp (MM)

Dollar Financial U.K. Ltd., which is a wholly owned U.K. subsidiary of Dollar Financial Corporation (DLLR) has completed the acquisition of Purpose U.K. Holdings Limited for $195 million, which was announced on December 31, 2010.

Purpose U.K. Holdings is the parent company of Month End Money (“MEM”), which operates under the brand name PaydayUK since 2003 and provides online payday loans throughout the U.K.

The transaction was financed by a combination of existing cash and utilization of Dollar Financial’s expanded global revolving credit facility.

Recently, Dollar Financial planned to go for a four-year global revolving credit facility of $200 million in March 2011 to replace its credit facility in U.S. and Canada. The new facility replaces the existing revolving credit facility in U.S. of $75.0 million and C$28.5 million facility in Canada, and is expected to mature on March 3, 2015.

Dollar Financial’s revolving credit facility will facilitate deployment of funds globally in an efficient manner by allowing multiple tranches of multi-currency borrowings. Besides this, Dollar Financial will be able to continue its business expansion and diversification strategy.

Dollar Financial anticipates that the acquisition of Purpose will contribute approximately $7.0 million of incremental EBITDA inclusive of non-recurring transition expenses for the remaining three months of the fiscal year ended June 30, 2011. Furthermore, the acquisition is expected to add approximately $0.05 per share to the earnings of the fourth quarter ending June 30, 2011.

Dollar Financial expects to reflect the MEM acquisition in the earnings outlook for fiscal year ending June 30, 2011.

The acquisition of Purpose is expected to strengthen and secure the company’s position as the leading provider of financial services to the unbanked and under-banked consumers in the U.K. It is expected that Dollar Financial will leverage the MEM management team and their scalable technology platform, strong business acumen and industry expertise in the future expansion of the global internet lending platform both within the U.K. and Canada, as well as elsewhere in Europe.

We believe that Dollar Financial is vigorously pursuing its global acquisition strategy. Recently on December 31, the U.K. subsidiary of Dollar Financial, Dollar Financial U.K. Ltd., completed the acquisition of a leading pawn lending Scandinavian company, Sefina Finance AB, for approximately $73 million in cash. The Sefina acquisition is expected to be accretive immediately and Dollar Financial expects the deal to reflect in its earnings outlook for 2011.

In April 2010, Dollar Financial acquired Suttons & Robertsons, the fourth-largest pawn-broking business in the UK, for £15 million with additional potential payments amounting to £2.5 million, over the next two years. Furthermore, in August 2010, Dollar Financial agreed to buy Swedish Internet lending business Folkia Group AS for $28 million.

Overall, Dollar Financial has been tapping this growing opportunity through mergers and acquisitions and we believe that the acquisition of Purpose will strengthen its position as a leading provider of internet loans across U.K.

Though the company is on a business shopping spree, risks related to its tax strategies, increased debt obligation and its increased international dependence continue to be concerns. Nevertheless, liquidity, exposure to a somewhat recession-proof sector and cost containment measures will drive growth in the future.

 
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