Paragon diversifies with £117m acquisition of asset finance specialist
SOLIHULL-based financial services group Paragon has muscled into the asset finance market through a £117m acquisition.
The firm, which is keen to diversify its offering to SMEs, has bought, through its subsidiary company Paragon Bank, Five Arrows Leasing from Rothschild & Co.
Five Arrows Leasing was formed in 1988 and has been owned by Rothschild & Co since 1996. It offers a range of asset finance products, through its subsidiary brands, to UK SMEs, including equipment, vehicle and construction equipment finance.
At the end of March, Five Arrows Leasing had assets of £245.1m, financed by £42.9m of shareholders’ funds and a £178m loan from Rothschild & Co.
In the year to 31 March 2015, Five Arrows Leasing made a pre-tax profit of £10.2m.
Its loan book currently stands at around £240m, financed by a £193m loan from Rothschild & Co.
The transaction is expected to complete by 3 November 2015, when the equity consideration will be paid by Paragon Bank and the inter-company debt refinanced via Paragon Bank’s retail deposits.
Paragon, a plc, told the London Stock Exchange this morning that the acquisition is expected to be enhancing to earnings and return on equity in the group’s 2016 financial year. It says it will take Paragon Bank from its expected break-even level in 2016 to profitability.
Five Arrows Leasing will form the basis for further SME finance development within Paragon Bank and it will be re-branded in the near future to reflect its change in ownership.
Paragon Bank has said it intends to deliver a range of offerings in the UK mortgage, consumer lending and SME markets over the coming years through a combination of organic and acquisitive developments.
Nigel Terrington, Paragon’s chief executive, said: “I am delighted that we have acquired Five Arrows Leasing, a business we have admired for many years as a market leader in the asset finance sector.
“The acquisition provides the opportunity to continue pursuing our strategy of diversifying the group’s income streams, building strong and sustainable earnings growth and enhancing our return on equity.
“The Five Arrows Leasing culture, philosophy and operating model is an excellent fit with the group and we look forward to working with their management team and to supporting growth opportunities across the SME markets.”
Law firm Harrison Clark Rickerbys led on the deal.
