MEXICO CITY, Feb. 22, 2016 /PRNewswire/ -- Credito Real, S.A.B. de C.V., SOFOM, E.R. ("Credito Real") informs the acquisition, through one of its subsidiaries, of 70% of the equity interests issued by a Panamanian company named Maravalley Corporation, which is a holding company with several entities in Costa Rica, Nicaragua and Panama operating under the "Instacredit" commercial name. This transaction contributes to Credito Real's business diversification.
Instacredit is a group of financial and non-financial entities, which grant loans to the low and middle-income segments of the population, whose needs are not adequately served by traditional banking institutions. Instacredit started operations in 2000, and currently operates 52 branches in Costa Rica, eight in Nicaragua and one in Panama. As of September 2015 Instacredit had a 159 million US dollar gross loan portfolio, diversified in four business lines: personal loans which represented 46%, auto loans 36%, SME loans 17% and mortgage loans 1%. By country, the loan portfolio of Costa Rica represented 87% of total; and the Nicaraguan and Panamanian represented 11% and 2% respectively. Instacredit has a well-recognized brand in the market, a distribution and service network serving 140,000 customers with potential to be scaled, and a credit analysis platform with detailed customer information. The average loan amount of Instacredit is 1,100 US dollars, and the average loan term is 34 months. Finally, the non-performing loan ratio as of September 2015 was 3%.
With this transaction Credito Real seeks to accomplish four strategic objectives:
- Continue diversifying the loan portfolio, attending the same customer segment that Credito Real currently serves with similar products,
- Penetrate other Latin-American markets,
- Get access to a business platform with great growth potential, because Instacredit's network will allow to increase customer base in the countries it currently operates and other countries of the region, and
- Obtain efficiencies in the operating model through the knowhow merge of Credito Real and Instacredit.
As a result of the acquisition, Credito Real will consolidate Instacredit's results in its financial statements beginning on February 22nd, 2016. The aggregate consideration payable for this transaction assumes a value of 70 million USD, which corresponds to a P/E multiple of 5.5 times 2016 estimated earnings; this multiple might vary depending on the achievement of some profit targets. Additional to this amount, 21 million USD will be used to refinance some Instacredit liabilities.
Subsequent to this operation, the CEO and founding shareholder of Instacredit will remain as CEO with a 30% minority stake; also establishing incentives for achieving growth and profitability objectives in the following years.
Credito Real's business model encourages loan portfolio expansion and diversification, keeping the focus on customers traditionally underserved by other financial institutions.
The effect of the consolidation of Instacredit will be disclosed in Credito Real's 2016 earning releases. The historical effect of Instacredit in the pro-forma financial statements will be submitted tomorrow in the corporate restructuring brochure, available at www.creal.mx and www.bmv.com.mx.
About Credito Real
Credito Real is a leading financial institution in Mexico, focusing on consumer lending with a diversified business platform in five main lines of business: payroll loans, used car loans, small business loans, durable goods loans and group loans. Credito Real offers its products mainly to the low and middle segments of the population that have historically been underserved by other financial institutions.
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Credito Real shares are listed on the Mexican Stock Exchange under the ticker symbol and series "CREAL*". (Bloomberg identification number is CREAL* MM)
SOURCE Credito Real