CHARLOTTE, N.C., Aug. 10, 2021 /PRNewswire/ -- Truist
Financial Corporation (NYSE: TFC) today announced that its wholly
owned bank subsidiary, Truist Bank, has signed a definitive
agreement to acquire Service Finance Company, LLC (Service
Finance), a leading national provider of point-of-sale (POS)
financing solutions for the home improvement industry, for
$2 billion. The acquisition of
Service Finance expands Truist's POS lending business, which
currently includes Sheffield Financial, a leading POS lender in the
power equipment, power sports, trailer and other consumer products
segments. Service Finance and Sheffield will serve more than 250
manufacturers, associations and other sponsors spanning
approximately 29,000 contractors and dealers—making Truist a
leading national provider of POS lending solutions.
Based in Boca Raton, Florida,
Service Finance uses proprietary technology to deliver innovative
payment solutions to more than 14,000 home improvement dealers and
contractors, helping them provide prime and super-prime borrowers
with financing for a wide range of home improvement products and
projects.
"The acquisition of Service Finance expands the scale and
capabilities of our wholesale payments businesses, enabling Truist
to deliver innovative financing solutions to Service Finance's
nationwide network of dealers and serve homeowners across the
country," said Mike Maguire, head of
National Consumer Finance and Payments at Truist. "This acquisition
significantly strengthens Truist's leadership position in the
rapidly growing POS industry, and we're excited to partner with
Mark Berch and the entire Service
Finance team."
"Service Finance's client-centric model, coupled with Truist's
financial strength and commitment to POS lending, perfectly
position us to continue to provide distinctive, secure and
successful client experiences," said Jeff
McKay, head of Truist's POS lending unit. "Just like
Sheffield, Service Finance partners with leading brand names in
their industry and has earned a reputation for unparalleled client
service and delivering innovative solutions."
"As a former home improvement contractor, I know how important
it is to help contractors and their customers get access to
convenient and attractive financing so our end-customers can spend
more time enjoying the moments that matter, in the place that
matters the most—their homes," said Mark
Berch, president and founder of Service Finance. "This is a
dynamic market with tremendous potential, and joining Truist only
improves our outlook for growth."
More than 80% of Service Finance's loan applications are
completed on its mobile application, offering homeowners a simple,
fast and paperless experience. Originations are expected to exceed
$2.5 billion in 2021 and have grown
at approximately 30% annually over the past three years, making
Service Finance a top-three home improvement POS finance company.
Truist has a strong historical relationship with Service Finance
and significant experience in the home improvement industry,
including having purchased more than $2
billion of loans from Service Finance since 2018.
In addition to being highly strategic, the acquisition is also
financially attractive:
- Strong profitability profile generating greater than 3% cash
return on assets (ROA) (run-rate), with low credit risk (average
FICO greater than 760)
- Allows Truist to deploy its strong capital and substantial
liquidity position (approximately 50 bps reduction in Truist's
Common Equity Tier 1 ratio anticipated)
-
- Service Finance currently maintains relationships with funding
partners that purchase its loans; however, under Truist's
ownership, the vast majority of loans will be held on Truist's
balance sheet
- Strong return on invested capital: Mid-teens IRR
- Earnings-per-share (EPS) accretion:
-
- Assuming the acquisition replaces planned share repurchases
(capital neutral), approximately 1% cash EPS dilution in year
two
- Assuming the acquisition uses excess capital, approximately 2%
cash EPS accretion in year two
- Long-term, accretive to Truist's already strong profitability
metrics: ROA, return on tangible common equity, efficiency ratio
and EPS growth
Berch and the Service Finance team will join the POS lending
unit of Truist's National Consumer Finance and Payments group and
continue to be based out of Boca Raton,
Florida. Service Finance is a wholly owned subsidiary of
Canadian-based ECN Capital Corp. Truist is targeting a late
2021 close for the acquisition, subject to standard licensing and
regulatory approvals, and satisfaction of customary closing
conditions.
Davis Polk & Wardwell LLP
served as legal counsel, and Truist Securities served as financial
advisor to Truist. Cravath, Swain & Moore LLP served as legal
counsel to ECN Capital Corp.
About Truist
Truist Financial Corporation is a
purpose-driven financial services company committed to inspiring
and building better lives and communities. Formed by the historic
merger of equals of BB&T and SunTrust, Truist has leading
market share in many high-growth markets in the country. The
company offers a wide range of services including retail, small
business and commercial banking; asset management; capital markets;
commercial real estate; corporate and institutional banking;
insurance; mortgage; payments; specialized lending; and wealth
management. Headquartered in Charlotte,
North Carolina, Truist is a top 10 U.S. commercial bank with
total assets of $522 billion as of
June 30, 2021. Truist Bank, Member
FDIC. Learn more at Truist.com.
About Sheffield
Winston-Salem, N.C.- based Sheffield Financial
is a division of Truist Bank, Member FDIC, which is a subsidiary of
Truist Corporation (NYSE: TFC). Sheffield, which has financed more
than $30 billion in loans since its
founding in 1992, currently services approximately 15,000 outdoor
power equipment, power sports and trailer dealers nationwide. The
company provides retail financing options in all 50 states for
outdoor power equipment, trailers and power sports equipment, such
as snowmobiles, all-terrain vehicles, side by side vehicles,
motorcycles and personal watercraft. For more information about
Sheffield Financial, visit SheffieldFinancial.com.
About Service Finance Company
Service Finance Company,
LLC ("SFC") is a subsidiary of ECN Capital Corp. (TSX: ECN), a
publicly traded vendor and finance company. SFC provides financing
solutions which include promotional and standard installment terms
for home improvement contractors enrolled in the SFC Financing
Program. SFC is an FHA Title I Lender and is authorized to conduct
business as a sales finance company and third-party servicer in all
fifty states and the District of
Columbia.
About ECN Capital Corp.
With managed and advised
assets of US$33 billion, ECN Capital
Corp. (TSX: ECN) is a leading provider of business services to
North American based banks, credit unions, life insurance
companies, pension funds and investment funds (collectively our
"Partners"). ECN Capital originates, manages and advises on credit
assets on behalf of its Partners, specifically unsecured loan
portfolios, secured loan portfolios and credit card portfolios. Our
Partners are seeking high quality assets to match with their
deposits or other liabilities. These services are offered through
three operating businesses: Service Finance, Triad Financial
Services and The Kessler Group.
To learn more about ECN Capital Corp. and Service Finance,
review the 2021 Investor Day presentation dated Feb. 4, 2021.
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SOURCE Truist Financial Corporation