DLLR Dfc Global Corp (MM)

Dollar Financial Corporation (DLLR) has priced its previously announced public offering of 6 million shares at $20.75 per share, to use the proceeds to help fund its acquisition of Purpose U.K. Holdings Limited in the U.K.

However, Dollar Financial earlier planned to underwrite a public offering of 5 million shares of its common stock, subject to market conditions. Further, according to the Securities and Exchange Commission, Dollar Financial allowed underwriters a 30-day option to cover allotments up to an additional 9 million shares of common stock.

The offering is expected to close on April 13, while Credit Suisse Securities (USA) LLC, a unit of Credit Suisse Group (CS) and Nomura Securities International, Inc., an arm of Nomura Holdings Inc. (NMR) will act as the joint book-running managers for the offering.

Dollar Financial expects gross proceeds of $124.5 million from the offering, which it expects to loan to Dollar Financial U.K. Limited, one of the company’s wholly-owned subsidiaries, to enable it to repay a portion of the amount, which was borrowed under the company’s global revolving credit facility in connection with the closing of the acquisition of Purpose.

Dollar Financial U.K. Ltd. has completed the acquisition of Purpose for $195 million recently, 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.

In relation to the acquisition of Purpose, Dollar Financial used a combination of its existing cash and 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.

Besides, Dollar Financial anticipates that 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 offers financial services like check-cashing mostly to lower-income customers. As of December 31, 2010, Dollar Financial operated 1,226 stores, including 100 franchised locations, under brand names including Money Mart and American Payday Loans in the U.S., United Kingdom, Ireland, Sweden, Finland, Poland and Canada.

We believe that the stock offering can prove a good source to raise money. However, they dilute the value of existing shares. Dollar Financial currently has about 36 million shares outstanding.

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

 
CREDIT SUISSE (CS): Free Stock Analysis Report
 
DOLLAR FINL CP (DLLR): Free Stock Analysis Report
 
NOMURA HLDG-ADR (NMR): Free Stock Analysis Report
 
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