Enova International entered into a definitive agreement to acquire all outstanding shares of OnDeck in a cash and stock transaction valued at approximately $90 million. The implied price of $1.38 per OnDeck share reflects a 43.6% premium to its 90-day volume weighted average price and a 90.4% premium based on the closing price of $0.73 per OnDeck share on July 27, 2020.
Enova will add OnDeck’s brand, products and services to its existing portfolio to create a combined company with offerings in consumer and small business market segments that banks and credit unions have difficulty serving. Together, Enova and OnDeck had $4.7 billion in originations in 2019 and have served approximately 7 million customers.
“This strategic transaction, which brings together two fintech leaders, is a great opportunity for customers, employees and shareholders of both companies,” David Fisher, CEO of Enova, said. “Together, our companies will be stronger because of the complementary strengths and synergies of our businesses. Acquiring a premier online small business lender and its ODX bank platform, and welcoming its innovative and talented team to Enova, will increase our scale and resources, providing us with opportunities to accelerate growth in our increasingly diversified portfolio as we continue to execute on our strategy to create long-term value for all of our stakeholders.”
“I am proud of the business we have built and the more than $13 billion of financing we have provided to underserved small businesses since our founding in 2006,” Noah Breslow, chairman and CEO of OnDeck, said. “Following an extensive review of our strategic options, we believe this is the right path forward for our customers, employees and shareholders. Joining forces with Enova, a highly-respected and well-capitalized leader in online lending, and leveraging our combined scale and strengths, provides the best opportunity for our long-term success.”
Enova expects the transaction will result in approximately $50 million in annual cost synergies and approximately $15 million in run-rate net revenue synergies to be fully phased in by the end of 2022. The transaction is expected to be accretive in the first year after closing and will generate earnings per share accretion of more than 40% when synergies are fully recognized.
As of March 31, 2020, on a pro forma basis, the companies had combined gross receivables of $2.4 billion, 61% of which were small business assets and 39% consumer assets. For the year ended Dec. 31, 2019, on a pro forma basis including synergies, Enova and OnDeck had estimated combined gross revenue of $1.65 billion, adjusted EBITDA of $427 million and adjusted earnings of $215 million.
The transaction is valued at approximately $90 million, of which $8 million will be paid in cash. Under the terms of the agreement, OnDeck shareholders will receive $0.12 cents per share in cash and 0.092 shares of Enova common stock for each share of OnDeck held.
Upon completion of the transaction, OnDeck shareholders will own approximately 16.7% of the combined entity, with Enova shareholders owning approximately 83.3%.
The transaction has been unanimously approved by the boards of directors of both companies and is subject to OnDeck shareholder approval and HSR approvals, along with customary closing conditions. The transaction is expected to close this year.
Fisher will continue to lead the combined company. Breslow will join the company as vice chairman and serve on the Enova management team.
Jefferies is acting as exclusive financial advisor to Enova and Vedder Price is acting as its legal advisor. Evercore is acting as financial advisor to OnDeck and Kirkland & Ellis is acting as its legal advisor.
