Triumph Business Capital closed the acquisition of the transportation factoring assets of Transport Financial Solutions (TFS).

The transaction was structured as the acquisition of TFS’ factoring assets, consisting primarily of $103.3 million of net accounts receivable and related transportation factoring assets, in exchange for closing cash consideration of $108.4 million, plus company common stock valued at approximately $13.9 million. In addition, TFS has the opportunity to earn contingent cash consideration of up to approximately $9.9 million following the 12-month period ending July 31, 2021. The parties also entered into an ongoing referral arrangement.

Triumph Business Capital is an indirect wholly-owned subsidiary of Triumph Bancorp and Transport Financial Solutions is a wholly-owned subsidiary of Covenant Logistics Group.

“We developed a strong relationship with the Covenant team as a customer utilizing our TriumphPay platform,” Aaron P. Graft, founder and CEO of Triumph Bancorp, said. “The trust developed through that relationship led to discussions on how Triumph Business Capital could leverage its factoring expertise to serve the TFS customers, while allowing Covenant to focus on its core business.”

“Like TFS, Triumph Business Capital is a high-performing organization with a complementary culture to ours,” Derwin Brendle, who has served as senior vice president and general manager of TFS since its inception in 2011, said. “This acquisition will enable a fluid and efficient transition for the TFS factoring customers as Covenant exits the factoring businesses and focuses its efforts on its core transportation and logistics services.”

“We are excited to welcome the clients of TFS to Triumph Business Capital,” Geoff Brenner, CEO of Triumph Business Capital, said. “We are also excited to welcome industry veteran Derwin Brendle to the Triumph team. He will work closely with our operational teams to ensure a smooth experience as the TFS clients migrate to our proprietary platform. Going forward, Derwin will serve as the vice president of special markets, maintaining key client relationships and identifying opportunities to further grow the Triumph portfolio.”

The transaction, net of operating cost savings from the addition of the portfolio to the Triumph Business Capital platform, is expected to be accretive to Triumph’s annual earnings by approximately $0.15 per share. The conversion of the TFS clients onto the Triumph Business Capital platform is expected to be completed by July 31, 2020.

For Covenant, the TFS transaction is expected to generate a third quarter pretax gain ranging from $34 million to $38 million. The third quarter gain from the sale of TFS is expected to modestly exceed the net amount of multiple second quarter gains, impairments and expenses relating primarily to the sale or exit of certain real estate, downsizing unprofitable operations, reallocating fleet assets toward contract logistics operations, and other actions consistent with the Covenant’s strategic plan.

“TFS has grown significantly since inception in late 2011 and delivered consistently strong margins and returns,” David R. Parker, chairman and CEO of Covenant, said. “With a critical mass of over $100.0 million of capital deployed and strong growth opportunities, it was time to transition the business to an owner with a core lending focus and deep knowledge of the transportation industry. We are confident Triumph is the right partner for TFS’ clients going forward. The ability to pay down over $120.0 million of debt in the near term is consistent with our goals of significantly reducing our leverage and concentrating our business model on services and sectors where we can add considerable value to our partner-customers in the U.S. logistics industry.”