Encore Capital Group Inc., a large U.S.-based debt buyer, announced Monday that it will acquire UK-based debt buyer Marlin Financial Services for approximately $481 million through Cabot Credit Management, a UK subsidiary of Encore acquired last year.
Marlin will integrate into Cabot and the deal is being financed with debt taken on by Cabot.
Cabot's acquisition of Marlin expands Encore's strong presence in the high-growth U.K. and Irish markets, which together comprise the largest mature credit market in the world after the U.S.
The two companies will create the largest unsecured debt buyer in the U.K., and the companies expect to generate substantial synergies that will drive profit growth in the near term, with future upside potential. The transaction is expected to be accretive to Encore's 2014 earnings per share.
According to Ken Vecchione, CEO of Encore, the acquisition sends a clear signal that Encore will continue its expansion to capitalize on growth and consolidation opportunities both domestically and internationally.
"As we have said before, our goal is to consistently deliver 15 percent growth in earnings per share. We plan to achieve this by focusing on three key areas: growing our existing businesses, including Propel and Cabot, expanding into new geographies, and diversifying into new asset classes. Cabot's acquisition of Marlin aligns perfectly with this strategy."
Marlin brings to Cabot a mature legal collections operation, which Encore officials believe is an ideal complement to Cabot's success with collecting on semi-performing debt, where consumers have a high willingness to pay. Cabot and Marlin will expand their ability to collect on their respective portfolios, potentially generating additional liquidation on future purchases.
The acquisition also will accelerate Cabot's growth into the secondary and tertiary asset classes, expanding the addressable market.
"We are excited about the possibilities afforded by this acquisition and the platform for growth it creates in the U.K. market," Vecchione continued. "Transactions like these allow us to deliver on our commitment to earnings growth. In addition, we are well positioned to capitalize on the growing trend toward consolidation in the U.K., just as we have in the U.S."
Encore also announced that as part of the agreement, Ken Stannard, Marlin's CEO has been appointed chief executive officer of Cabot, with Neil Clyne, Cabot's current CEO, stepping down to pursue other interests.