Terms of the deal call for Lone Star Global Acquisitions Ltd. to pay $9.50 per share in cash for each share of Berwyn, Pa.-based DFC, a premium of about 5.8% to the target's Tuesday close. The deal values DFC equity at about $366.5 million.
DFC is a provider of unsecured consumer loans, secured pawn loans, check cashing, gold buying and other services in ten European and North American countries, operating from about 1,500 retail outlets with brands including Money Mart, The Money Shop, Insta-Cheques, MoneyNow! and ExpressCredit.
Company chairman and CEO Jeff Weiss in a statement said the deal "delivers immediate cash value to our stockholders" while providing DFC with a partner that can help it to expand.
"Lone Star Funds is a sophisticated investor with broad-based financial and retail expertise, and we look forward to taking advantage of enhanced financial flexibility to find new ways to build our business while continuing to meet and exceed the needs of our global customer base," Weiss said.
DFC has been the target of shareholder lawsuits accusing the company and some of its executives of misrepresenting information to investors. The company in November withdrew a $650 million senior unsecured notes offering and called off a cash tender for outstanding notes after a class action lawsuit was filed against it.
The West Palm Beach Police Pension Fund filed suit against the company and two executives in the U.S. District Court for the Eastern District of Pennsylvania in Philadelphia alleging that the company engages in predatory lending with high fees to consumers that had no means to repay them and participated in other irresponsible lending practices.
The plaintiffs claimed DFC "misrepresented to investors that it complied with government regulations and guidance with regard to irresponsible lending practices, and that the company made 'prudent,' 'conservative,' and 'responsible' underwriting decisions when making loans."
DFC said it believes the "complaint is without merit" and said it intends "to defend against it vigorously."
More recently the company has come under pressure due to new regulatory guidelines for lending in the United Kingdom, as well as currency exchange issues. DFC on Wednesday reduced its guidance for fiscal 2014 Ebitda to between $151 million and $156 million, from $170 million to $200 million, and took down earnings per share estimates due to those issues and its tax rate.
DFC was advised on the sale by Houlihan Lokey Capital and Pepper Hamilton.
Lone Star received financial advice from Jefferies along with Credit Suisse Securities (USA), with Jefferies Finance and Credit Suisse (CS) providing debt financing commitments for the acquisition and Gibson Dunn & Crutcher serving as legal counsel to the buyer.