6th Dec 2016 07:00
FOR IMMEDIATE RELEASE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
6 December 2016
Arrow Global Group PLC
Proposed Acquisition of Zenith Service SpA
Summary
Arrow Global Group PLC ('Arrow' or the 'Group'), one of Europe's leading purchasers and managers of debt, today announces that it intends to enter the Italian market having agreed terms to acquire Zenith Service SpA ('Zenith'), a leading servicing business in the Italian structured finance market, for an enterprise value of €17m. The transaction is subject to regulatory approval by the Bank of Italy.
Highlights
· The acquisition of Zenith, a leading master servicer in the highly active €168bn1 Italian structured finance market, is a strategic purchase that gives Arrow immediate scale and presence in one of Europe's largest debt markets.
· Zenith is also a leading servicer of salary assignment loans (cessione del quinto or CQS), managing c€1.9bn of CQS assets. As at June 2016, the estimated stock of the securitized market for CQS in Italy amounted to more than €3.2bn.
· Zenith has developed a reputation for quality and service in a complex, regulated market with €14.1bn assets under management across multiple asset classes. It expects revenues of over €11m and EBITDA of approximately €3.2m in 2016.
· Zenith has a strong and established client base of leading Italian and international banks and funds, offering Arrow an excellent platform to grow its business in Italy.
· Zenith has an experienced management team with extensive expertise in securitised transactions and master servicing, complementing Arrow's existing offerings across the Group. Arrow will retain Zenith's management team and existing service offering, but as part of its wider Italian strategy, plans to pursue a broader client offering.
· The acquisition will further expand Arrow's European footprint, building on the Group's top three market positions in the UK, Portugal and Benelux and will reinforce its position as a leading European debt purchase and management business.
· The acquisition increases the weighting of asset management revenues across the Group.
· The acquisition offers Arrow valuable insight into the Italian market and the performance and administration of credit portfolios.
· The agreed acquisition is expected to be earnings neutral after taking into account amortisation of the acquisition intangible assets and will be funded in cash from existing resources, with 60% payable on closing and 40% payable 12 months after closing.
· The acquisition is anticipated to complete in H1 2017.
Tom Drury, Chief Executive Officer of Arrow commented:
"Today's agreed acquisition of Zenith marks our strategic entry into Italy. Italy is one of Europe's largest and fastest growing potential markets for servicing and acquiring non-performing loans and other financial services assets. Zenith is our first step in creating a strong market proposition in Italy, where Arrow and Zenith already share some common clients. Zenith provides a low risk, robust platform and important servicing capabilities. Clients value Arrow's breadth of expertise, data capability, reach and scale and Zenith meets all of these criteria. Additionally the acquisition affords us an excellent vantage point from which to consider asset servicing growth in line with our targeted returns.
"Zenith is a leading Italian master servicing business in the highly active structured finance market and the number one player in the Italian Asset Backed Securities market for CQS, complementing our existing expertise in master servicing and servicing structured finance transactions. The acquisition further diversifies our income streams and brings a strong and visible pipeline.
"We look forward to working with Zenith's founder and CEO, Giuseppe R. Amato and our new colleagues as we continue to deliver on our strategic objectives. We continue to see opportunities for growth across the European marketplace and we will maintain our focus and discipline in terms of their evaluation."
Giuseppe R. Amato, founder and CEO of Zenith, said:
"We are delighted to be joining Arrow. It is an exciting time for the business as it continues to expand and develop its European strategy. We have built a strong business which complements well Arrow's existing expertise. We share the same customer-centric values and service quality and I look forward to working with Arrow's management team to further strengthen and grow our business in Italy."
Notes:
1 Source: Zenith and Assofin, the Italian Financial Association for the Consumer and Real Estate Market.
Enquiries:
Arrow +44 (0)161 242 5885
Tom Drury
Robert Memmott
Anthony Frost, Group Communications
Instinctif Partners +44 (0)20 7457 2020
Mike Davies
Giles Stewart
Forward looking statements
This announcement contains statements that constitute forward-looking statements relating to the business, financial performance and results of the Group, Zenith and the industry in which they each operate. These statements may be identified by words such as "expectation", "belief", "estimate", "plan", "target", or "forecast" and similar expressions or the negative thereof; or by forward-looking nature of discussions of strategy, plans or intentions; or by their context. All statements regarding the future are subject to inherent risks and uncertainties (including the completion of the acquisition of Zenith) and various factors could cause actual future results, performance or events to differ materially from those described or implied in these statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies, the acquisition of Zenith and the environment in which the Group will operate in the future. Further, certain forward looking statements are based upon assumptions of future events which may not prove to be accurate and neither Arrow nor any other person accepts any responsibility for the accuracy of the opinions expressed in this document or the underlying assumptions. The forward-looking statements in this document speak only as at the date of this announcement and Arrow assumes no obligation to update or provide any additional information in relation to such forward-looking statements.
Arrow Global Group PLC
Acquisition of Zenith: Further details
Zenith
Zenith was established as an independent company in 1999 and registered under Article 106 of the Italian Banking Act as a financial intermediary. It manages and oversees securitised and non-securitised loan portfolios from offices in Milan and Rome. The business has over 70 staff and typical clients include Italian and international banks, leasing companies, hedge funds and other financial entities.
Zenith has ranked as a master servicer since 2004 (above average with positive outlook) and the business has Master Servicing agreements for over €14.1bn of assets under management. The company further benefits from the stability of its revenue basis, which is linked to multi-annual mandates. Zenith offers a full suite of services including master servicing, back-up servicing, structuring/arranging, ECB and regulatory reporting and pool auditing. Zenith is also the leader in the Italian CQS servicing market, whereby customers elect to manage their debts by a direct deduction from their salary.
Transaction Details
Arrow will acquire 100% of the equity of Zenith for an enterprise value of €17m through a newly incorporated Italian company which is wholly owned by Arrow. The acquisition will be funded in cash from existing resources, with 60% payable on closing and 40% payable 12 months after closing. The acquisition is subject to Bank of Italy approval.
Arrow will retain Zenith's experienced management team and Zenith will continue to focus on its core asset management services for its clients, augmenting Arrow's client services offering.
Management and employees
Zenith's management team is led by Giuseppe R. Amato (founder and CEO), with Marco Grimaldi, Umberto Rasori and Marcella Valente. This team is extremely experienced and brings unique structuring and origination experience and strong client relationships which are valued by Arrow.
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