Target: Santander Consumer USA
Price: $1 billion for 25 percent
Sponsors: Warburg Pincus, Kohlberg Kravis Roberts and Centerbridge Partners:
Seller: Banco Santander SA
Financial Advisers: Goldman Sachs Group Inc., Bank of America Corp and Citigroup (Santander); Deutsche Bank AG and Barclays Capital (sponsors)
Legal Counsel: Cravath, Swaine & Moore (Santander); Simpson Thacher & Bartlett (sponsors)
Buyout firms led by
Warburg and KKR are taking equal economic stakes in the deal, while
The deal is the latest private equity foray in the U.S. consumer finance business, as these firms look to take advantage of a shrinking supply of consumer loans to people with credit problems as large banks exit the market. Warburg, for example, has made a series of investments in companies providing financial services to low-income consumers. It has invested in the Mutual Fund Store, which gives financial advice and sells mutual funds to such consumers, as well as Primerica Inc., the largest distributor of insurance and mutual funds to these consumers.
Centerbridge is bidding for Citigroup Inc.’s OneMain Financial consumer finance business. Last year,
The U.S. consumer finance business is one of Santander’s most profitable units, analysts said, and posted net profit of $455 million for 2010. Still, with the U.S. economy remaining weak, lending to nonprime consumers is risky, and the investors spent $9 million on due diligence for the company, the source said. Moreover, depending on the unit’s performance in 2014 and 2015, either the private equity investors or Santander might have to pay up to $595 million to the other side.
The new capital will be used by the business to fund growth, the source said. “It’s got a tremendous market opportunity in front of it, and to take advantage of that market opportunity, the company needs capital.”
Goldman Sachs Group Inc , Bank of America Corp and Citigroup advised the company, with Cravath, Swaine & Moore acting as the legal advisers. Deutsche Bank AG and Barclays plc’s Barclays Capital advised the private equity firms, while Simpson Thacher & Bartlett acted as their legal counsel.
(Paritosh Bansal is a correspondent for Reuters in New York; additional reporting by Martin Roberts in Madrid.)