FirstPlus Financial Group announced what it calls its most important deal to date, a $138 million stock-for-stock purchase of Life Financial Corp.

The Dallas-based lender's chief executive, Daniel T. Phillips, said the deal would provide FirstPlus with a lower cost of funds, long-term liquidity, and the opportunity to offer new products. In addition, Life would run FirstPlus' consumer finance division, Mr. Phillips said.

Life Financial of Riverside, Calif., is a subprime and high-loan-to- value lender and the holding company for Life Bank, a savings and loan association.

Life Financial and its thrift subsidiary have $409 million of assets and made $771 million in nonconventional mortgage loans in 1997.

The unit, which would be renamed FirstPlus Bank after the merger, originates loans mostly through broker relationships, but has nine retail branches in Southern California.

FirstPlus will soon be running television ads featuring its spokesman, Miami Dolphin quarterback Dan Marino, asking consumers to open checking accounts with FirstPlus Bank, Mr. Phillips said. FirstPlus is also considering offering credit cards, he noted.

Mr. Phillips said that Life is also attractive because it would give FirstPlus access to the small broker and correspondent channel.

In addition, Life has a unit that does commercial loan origination and servicing, a business in which FirstPlus is aggressively trying to expand, he said.

Life also has the capacity to originate and service home equity lines of credit and first-lien mortgage loans, Mr. Phillips said, which would enable FirstPlus to expand that business.

Life would retain chairman and chief executive Daniel L. Perl, who joined the company in 1994. Since Mr. Perl signed on with Life, the company's earnings went from a net loss of $650,000 to a net profit of $12.7 million in 1997.

Life will benefit from the transaction because it will gain access to origination, marketing, servicing, and risk management technologies, Mr. Perl said. First Plus is also a more efficient securitizer, he said.

FirstPlus would pay about $20 per share for Life. The stock closed at $18 the day before the announcement; it was trading at $20.50 late Friday.

The transaction will be immediately accretive to FirstPlus' earnings, Mr. Phillips said. He said he expects the acquisition to contribute 40 cents a share during calendar 1999.

The deal is expected to close in the third or fourth quarter of 1998 and would be accounted for as a pooling of interests.

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