Portfolio Recovery Profit Tops View, To Buy Aktiv Kapital In $1.3 Bln Deal

(RTTNews) - Portfolio Recovery Associates, Inc. (PRAA) or PRA, a financial and business services company, Wednesday reported increased profit for the fourth quarter that topped estimates. The stock rose more than 8 percent in the extended trade.

Separately, the firm agreed to acquire Aktiv Kapital AS, a Norway-based company specializing in the acquisition and servicing of non-performing consumer loans throughout Europe and in Canada, in a deal with an enterprise value of $1.3 billion.

Net income attributable to Portfolio Recovery Associates increased to $45.78 million or $0.91 per share from $35.80 million or $0.70 per share in the same period last year.

On average, seven analysts polled by Thomson Reuters expected the company to earn $0.90 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues increased to $184.85 million from $154.25 million last year. Analysts expected revenues of $185.95 million.

Income recognized on finance receivables, net, advanced to $168.73 million from $138.07 million in the prior year. Cash collections climbed 22 percent to $278.9 million.

The company attributed the revenue growth to cash collections, which included finance receivables income net of principal amortization and allowance charges or reversals.

Steve Fredrickson, CEO of PRA, said, "Our fourth quarter results in 2013 contributed to our strongest year ever. As the global debt buying industry continues to evolve at a rapid pace, 2014 promises to be a year of extraordinary opportunity and challenge."

Further, PRA agreed to acquire the equity interest in Aktiv Kapital for about $880 million, while also agreeing to assume around $435 million of its corporate debt, leading to an acquisition of estimated total enterprise value of $1.3 billion.

PRA is expected to finance this transaction with a combination of cash, $170 million of seller financing, $435 million from its domestic, revolving credit facility and by accessing an accordion feature on its credit facility of up to $214 million.

The company expects expenses related to this transaction totaling around $15 million over the first and second quarters of this year. The transaction is expected to close in the second quarter.

Through the acquisition, PRA will gain immediate access to sellers of consumer debt in new markets beyond the U.S. and the U.K. Aktiv Kapital will also provide a platform for growing investment in and servicing of consumer debt across Europe.

The combined company will become one of the world's largest acquirers of non-performing consumer debt from banks and other creditors, with more than $4.6 billion in estimated remaining collections from customers.

Steve Fredrickson said, "This will be a transformative transaction for PRA, expected to be immediately accretive to earnings."

PRAA closed down 0.9 percent at $50.48 on Wednesday and added 8.4 percent in the extended trade.