CHICAGO, Jan. 5, 2011 /PRNewswire/ -- Zacks.com Analyst
Blog features: Dollar Financial Corporation (Nasdaq:
DLLR), CapitalSource Inc. (NYSE: CSE), Global Cash
Access Holdings Inc. (NYSE: GCA), Sprint
Nextel (NYSE: S) and Clearwire Corp. (Nasdaq:
CLWR).
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Here are highlights from Tuesday's Analyst Blog:
Dollar Financial Expands in U.K.
In an attempt to expand its payday lending business in U.K.,
Dollar Financial U.K. Ltd., a wholly owned U.K. subsidiary
of Dollar Financial Corporation (Nasdaq: DLLR) has
agreed to acquire Purpose U.K. Holdings Limited for $195 million.
Purpose is a provider of online payday loans, which operates
under the brand PaydayUK in U.K. since 2003.
The deal is expected to complete in the next 90 days, which is
subjective to closing conditions and regulatory approval. Further,
the acquisition of Purpose would immediately add to the earnings of
Dollar Financial, which will be reflected in the earnings outlook
of 2010 that the company is expected to provide after the closure
of the deal.
Besides U.K., the company has expanded its footprint in
Mexico too. Dollar Financial is on
track acquiring payday lenders outside the U.S., as the company is
trying to curb its exposure to U.S. regulations, which targets at
limiting the interest rates. The regulation has capped the interest
rates on payday loans to 36% to support the low and middle income
families.
Apart from acquiring payday lending businesses, Dollar Financial
is vigorously pursuing its pawn lending business growth strategy
across product and geography, primarily in highly regulated pawn
lending markets such as Sweden and
Finland.
Recently in 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 be reflective 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.
Further, in August 2010, Dollar
Financial agreed to buy Swedish Internet lending business Folkia
Group AS for $28 million.
Overall, Dollar Financial has been tapping on 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.
Moreover, Dollar Financial is expected to benefit from the solid
management team of Purpose, along with its strong business and
industry expertise, which will facilitate the expansion of the
global internet lending platform, both within the U.K. as well as
other countries in Europe and
Canada.
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 float on the
surface. Nevertheless, good liquidity, exposure to a somewhat
recession-proof sector and cost containment measures will drive
growth in the future. Dollar competes with CapitalSource
Inc. (NYSE: CSE) and Global Cash Access Holdings
Inc. (NYSE: GCA) in the payday lender industry.
Sprint Rejects Clearwire Debt
Sprint Nextel (NYSE: S), the third-largest U.S.
wireless carrier, refused to purchase debt form Clearwire
Corp. (Nasdaq: CLWR), which is running a risk of
defaulting its loan agreements. Sprint shares rose more than 6% on
this news.
On December 2, Clearwire announced
plans to raise about $1.2 billion in
new debt to finance further expansion of Sprint's wireless
broadband network. The deadline was January
2, and Clearwire is still in negotiations for fresh funding
with new and existing customers including Sprint and T-Mobile, a
unit of Germany's Deutsche Telekom
AG. Sprint declined to participate in the debt offered by
Clearwire.
Sprint Nextel owns a hefty 54% stake in Clearwire and offers
speedy data services to customers via 4G WiMax (a wireless
broadband technology) network in collaboration with the latter.
In November, Clearwire raised doubts on its ability to
accumulate funds or operate as a "going concern" due to nagging
losses, raising worries about Sprint's financial position. After
years of struggle, Sprint has narrowed its subscriber losses by
using the Clearwire network.The 4G WiMax deployment offers a major
prospect in the wireless market that might boost Sprint's
revenues.
During the third quarter, Sprint gained approximately 644,000
subscribers, representing 364,000 retail subscribers and 280,000
wholesale and affiliate subscribers in total. This was reportedly
the best wireless subscriber growth since 2006.
Sprint's adjusted net loss per share of 18 cents surpassed the Zacks Consensus Estimate
by 10 cents. Revenue increased for
the first time in three years and was also above the Zacks
Consensus Estimate.
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