Household International, a finance company that caters to customers most banks turn down, announced a $1.1 billion deal Wednesday that will more than double its branch presence.

The planned acquisition of Transamerica Corp.'s consumer finance unit would bulk up an already formidable player in the growing, but volatile, consumer finance business.

Household, based in Prospect Heights, Ill., is the second-largest finance company in the United States, with more than $40 billion in managed receivables. When the deal closes in the third quarter, the company will add 530 branches, a $3.3 billion loan portfolio, and more than 2,300 employees.

The move gives Household a "high-quality portfolio of real estate loans and a great branch network," said chief executive officer William Aldinger, a former vice chairman of Wells Fargo & Co.

But the transaction also raised eyebrows, with observers saying Household may have overpaid for the business unit. Last year, San Francisco-based Transamerica's consumer finance arm recorded a $45.1 million loss, mainly because of a selloff of nonperforming loans.

The premium of 2.3 times book is "a full price," to put it mildly, said Michael Durante, an analyst with Prudential Securities, New York. But he added, Household has the management strength to wring out profits.

For its part, Household said the portfolio it is buying is clean, with no loans more than 60 days delinquent. Still, half of the pool is relatively young; the Transamerica unit reported originations of $1.7 billion in loans last year. Delinquencies increase over time for most loan pools.

Household is expanding at a time when many banks are eyeing the consumer finance business. Lending to people with poor or unestablished credit histories is a growing and lucrative business. Banks such as KeyCorp and Barnett Banks Inc. have jumped into the field, hoping to reap fat profits.

The 530-branch network that comes with the deal is really the "main attraction" for Household, said Jeffrey Evanson, analyst with Piper Jaffray, Minneapolis.

High branch count is important for successful consumer finance business, said Cynthia Glassman, senior manager at Ernst & Young, New York. "The nature of the customer is somewhat less sophisticated, with a lower income ... they need a personal relationship to go in and pay off their loan," she said.

Household is planning on using the acquisition to cross-sell loan products-like second mortgages-to former Transamerica customers, a spokesman said.

But history suggests that Household may have acquired a billion-dollar headache.

In 1995, Transamerica's consumer finance division lost its chief executive, Alan C. Miech, and Transamerica's executive vice president Robert Watson has been serving as acting division chief since then. A Household spokesman said the company will not be acquiring any of Transamerica's senior management.

The increased debt level that Household now carries sparked rating agency Fitch Investors to put the company FitchAlert negative.

"They're really leveraging up," said Helene Moehlman, senior director at Fitch. The warning will be removed when Fitch issues a planned $900 million in additional equity, which is expected over the next three months, she noted.

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