Transamerica Corp.'s commercial finance division signed a definitive agreement Thursday to purchase Whirlpool Financial Corp., the finance arm of the nation's largest appliance manufacturer.
Transamerica will pay $1.35 billion for the unit, which includes inventory, retail, and international loan portfolios, as well as a private- label credit card bank. The transaction is expected to close at the end of the fourth quarter.
The purchase price represents a 14% premium over the Whirlpool unit's assets and receivables, a sum that some analysts said was in line with other recent commercial finance acquisitions.
Whirlpool Financial's $1.23 billion loan portfolio includes loans made to appliance and lawn and garden tool dealers worldwide, as well as those made to consumers who purchase these items-business lines that are not new to Transamerica.
San Francisco-based Trans-america already ranks No. 1 in inventory finance for appliance dealers nationwide, the company said. It holds more than $4.4 billion in commercial receivables.
The acquisition is expected to produce "significant cost savings" over the next year and a half, said Transamerica executive vice president Bob Watson in a conference call.
Most of these cost savings would come from the elimination of Whirlpool Financial personnel, Mr. Watson indicated, but he would not say how many employees would be terminated.
The acquisition also includes a 10-year strategic alliance with Benton Harbor, Mich.-based Whirlpool Financial's parent, Whirlpool Corp. Transamerica would be the exclusive provider of inventory financing to all of the appliance manufacturer's dealers worldwide during that time period.
Whirlpool Financial's international branches in Europe, Argentina, and Mexico would let Transamerica expand its inventory financing position significantly in six countries, Mr. Watson said.
The acquisition also includes Whirlpool Financial National Bank, a private-label credit card bank that caters to appliance dealers.
The acquisition is expected to strengthen Transamerica's position in the market, analysts said. "They're trying to provide to the retailer a full package of financing options, which is a good thing to do," said Philip Walker, Fitch Investors Services, New York.
"They're buying into a business line that they're already successful in," he said. "There's no reason their success won't continue here."
The acquisition will be funded by a $235 million equity contribution from Transamerica and bridge loans with several unannounced banks, said Transamerica chief financial officer Edward Grepp.