Italy's bad loan manager doValue to buy rival Gardant, shares surge (updated)

doValue

07/06/2024 10:19

(Recasts, adds details and share movement)
       June 6 (Reuters) - Italy's doValue  DOVA.MI  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 5%.
    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.
    Broker Equita said the deal "strategically makes sense" as
it improves doValue's Italian business outlook and the group's
Unlikely to Pay (UTP) business.
    The acquisition, set to close in the last quarter of the
year, is expected to add to doValue's earnings per share in the
medium term. 
    The combined group will reach revenues in the range of 605
million euros ($658.78 million) - 625 million euros in 2026 and
an adjusted core profit between 240 million euros to 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 82.53
million euros of the rights issue. 
    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)

 (Reporting by Gnaneshwar Rajan in Bengaluru and Claudia
Cristoferi in Milan; Editing by Janane Venkatraman, Giulia
Segreti and Sriraj Kalluvila
)
 ((Gnaneshwar.Rajan@thomsonreuters.com;))