Joint Venture
Date: 06-11-2003
Source: IFG
IFG Group plc ("IFG") is pleased to announce that it has agreed to enter into a joint venture with GE Capital Woodchester Limited ("GE Capital Woodchester") whereby GE Capital Woodchester will acquire from IFG 50% of the issued share capital of each of IFG Investment and Mortgage Services Limited and IFG Mortgage and Assurance Services Limited (together "IFG Mortgages") and enter into, inter alia, a Shareholders’ Agreement to regulate the management of IFG Mortgages going forward (the "Joint Venture").
Under the terms of the Share Purchase Agreement the aggregate maximum amount receivable by IFG may be up to €13.3 million comprising;-
(i) initial consideration of €10.35 million payable in cash on Completion, of which €1.3 million is in respect of half of the net assets reflected by the shares being acquired by GE Capital Woodchester and €1.25 million is conditional consideration payable on account: and
(ii) deferred conditional consideration of €1.75 million payable in cash within six years of Completion; and
(iii) prior to Completion declaration of dividends of up to €3.8 million and recapitalisation of IFG Mortgages by IFG of up to €2.6 million, yielding a maximum of €1.2 million.
The conditional and deferred conditional consideration set out at (i) and (ii) above are subject to achievement by IFG Mortgages of certain profits before taxation and new specialist mortgage volume targets between Completion and 31 December 2008.
The Joint Venture is subject to approval from the Irish Financial Services Regulatory Authority under section 39(5) of the Investment Intermediaries Act 1995 and from the Competition Authority so that it may be put into effect in accordance with the Competition Act 2002. Completion will be effected once such appropriate approvals are received.
BACKGROUND TO AND REASONS FOR THE JOINT VENTURE
IFG is a specialist financial services company, headquartered in Dublin, with its principal operations in Ireland, the United Kingdom, the Isle of Man and Jersey. Its main businesses are International Trustee and Corporate Services, Actuarial and Pensioneer Trustee Services, IFA Financial Services and other financial services, including mortgage intermediary, marketable endowment policy trading, credit insurance services and employee leasing. More information can be found online at www.ifggroup.com and www.ifgmortgages.ie.
IFG Mortgages was established in 1991 as a retail mortgage broker providing services directly to the consumer. It now operates as a business to business model providing support services to mortgage intermediaries throughout the Republic of Ireland, from its base at IFG House, Booterstown Hall, Co. Dublin. In the year ended 31 December 2002, mortgage completions were €590 million, an increase of 79% over the corresponding year. In the first nine months of 2003, mortgage completions were €606 million, an increase of 46% over the corresponding period in the previous year. In the year ended 31 December 2002, IFG Mortgages recorded an operating profit of €0.973 million on turnover of €7.67 million. At 31 December 2002, the net assets were €2.01 million.
GE Capital Woodchester, the operating business of GE Consumer Finance in Ireland, is a leading provider of personal, motor and equipment finance, providing specialised financing products and services such as equipment and car leasing, hire purchase and loans to businesses and individuals across Ireland, GE Capital Woodchester is part of GE Consumer Finance. More information is available at www.gecapital.ie.
GE Consumer Finance, with more than $95 billion in assets, is a unit of General Electric Company, and is a leading provider of credit services to over 100 million consumers, retailers and auto dealers in 36 countries around the world. GE Consumer Finance, based in Stamford, Conn. (USA), offers a range of financial products, including personal loans, bank cards, auto loans and leases, mortgages, corporate travel and purchasing cards, debt consolidation and home equity loans and credit insurance. More information can be found online at www.geconsumerfinance.com. General Electric Company (NYSE: GE) is a diversified services, technology and manufacturing company with operations worldwide.
In 2001 GE Consumer Finance acquired i-group, one of the leading players in the "Specialist" lending area in the UK. The specialist lending area is comprised of customers who demonstrate debt servicing capacity, despite not fitting the existing fixed underwriting criteria of other financial institutions. No loan origination company has serviced this lending area in Ireland until GE Capital Woodchester recently commenced a pilot programme, in conjunction with IFG Mortgages. The success of this pilot programme has convinced both participants that a business exists in Ireland for the product. The mortgage lender is GE Capital Woodchester Home Loans Limited ("GEHL").
It is envisaged that the Joint Venture will provide IFG with the following benefits:-
- agency rights in the Republic of Ireland to GE Capital Woodchester’s specialist lending mortgage products through the joint venture company on a fee and commission basis for providing the service;
- continued management control of IFG Mortgages, which retains its status as independent of any mortgage provider;
- an earnings enhancing opportunity arising from an enlarged mortgage business.
It has also become clear that significant benefits could be achieved through the integration of distribution and origination processing as already exists in IFG Mortgages relationship with other lenders.
The proceeds will be used to reduce the net borrowings of IFG significantly and for general corporate purposes. The impact on the IFG balance sheet is favourable and IFG is confident that as a result of the Joint Venture it will be better placed to avail of earnings enhancing opportunities. The trading results of IFG Mortgages will continue to be consolidated in IFG’s financial statements.
Commenting on the Joint Venture Richard Hayes Chief Executive of IFG said;-
"this transaction provides IFG with the opportunity to significantly develop its position in the Irish mortgage sector and enables the IFG Group to offer services on a broader basis throughout the Republic of Ireland".
Registered in the Republic of Ireland No. 21010
Registered Office: IFG House, Booterstown Hall, Booterstown, Co. Dublin
Tel: + 353 (0)1 2752800 | Fax: + 353 (0)1 2752801
Email: group@ifg.ie