Italy’s doValue (DOVA.MI), opens new tab has agreed to buy rival Gardant in a cash-and-stock deal, the country’s biggest bad loan company said early on Friday, bulking up in the face of ebbing flow of impaired debt due to banks’ surprisingly healthy loan books.
Shares of doValue jumped as much as 9% in early trade, but trimmed gains to be up 4%.
Impaired loans at European banks have held at very low levels thanks to government support measures that cushioned the shocks from the pandemic and energy crisis.
Faced with the dearth of new bad loan sales by banks and higher borrowing costs, debt collectors have been under pressure to join forces.
The deal, set to close in the last quarter of the year, will “accelerate execution of 2024-2026 business plan in areas of revenue diversification, increase of collection rate” said doValue CEO Manuela Franchi in an analyst call.
The group will get access to Gardant’s strength in asset management and its proprietary data-driven digital platform to optimize management of non-performing and unlikely-to-pay loans, she added.
The acquisition is also expected to add to doValue’s earnings per share in the medium term.
The combined group will reach revenues up to 625 million euros ($680.56 million) in 2026 and an adjusted core profit between 240-255 million euros.
Synergies are estimated to be of up to 15 million euros per year.
INVESTORS’ BACKING
The cash component will amount to 230 million euros, including 50 million euros of Gardant debt. DoValue will issue new shares, at a premium, worth 20% of the combined group to Gardant shareholders.
The financing will include a bank loan of about 500 million euros and a 150-million-euro rights issue to both existing and new shareholders.
Key shareholders of the two companies, including Fortress, Elliott, and Bain Capital, have committed to subscribing to 82.53 million euros of the rights issue, with the remaining 67.5 million euros already secured through an agreement with a bank syndicate.
At closing, Fortress will hold about 23% of the share capital, Elliott around 18% and Bain Capital about 11%.
DoValue said it would provide an enhanced payout policy upon deal completion and not pay dividends in 2025.
U.S. fund Elliott Management, the current owner of Gardant, will have two representatives on doValue’s board, which will include Gardant executives.
($1 = 0.9184 euros)
