Equitable Group reached an agreement to acquire Bennington Financial Services, a profitable and growing privately owned company serving the brokered equipment leasing market in Canada.
Bennington was founded in Oakville, Ontario in 1996 and has developed a strong market position in non-prime equipment leasing. It has a portfolio of over $400 million of leases managed by a team of 125 professionals. Bennington finances a wide range of assets with a focus on transportation, construction and food service equipment, has long-tenured relationships with professional leasing brokers throughout Canada, and employs a proven approach to adjudication with emphasis on lease structure, security and re-marketability.
This transaction furthers Equitable’s goal of broadening its reach as Canada’s Challenger Bank, with diversification into adjacent markets that complement its other secured lending businesses and broker-led distribution model.
“We are delighted that the team at Bennington has chosen to join with us to bring a new level of service to customers in Canada’s multi-billion-dollar equipment finance market,” said Andrew Moor, president and chief executive officer. “As Canada’s Challenger Bank, Equitable is strategically committed to growing and diversifying our secured lending businesses in attractive markets where we can establish distinct competitive advantages. Equipment finance is one of those markets. With its large, independent distribution network and proven underwriting, servicing and recovery processes, Bennington provides a unique competitive platform to fulfill our ambitions on a profitable, risk-managed basis.”
The acquisition is subject to customary closing conditions and is expected to be finalized on January 1, 2019.
Equitable will record an acquisition related provision through its Income Statement in Q1/19.
Equitable’s strategy for Bennington is to enhance its competitive positioning using Equitable’s Challenger Bank platform and access to cost-effective funding sources. Equitable expects that its funding capabilities will reduce Bennington’s cost of funds by over 100 basis points and will deliver material interest expense savings. This funding access will enable Bennington to: i) increase its participation in high-quality credit segments, ii) grow its equipment financing portfolio beyond what it could support with its current funding facilities, and iii) lend on larger value assets.
“Our decision to join Equitable is driven by the desire to increase the scale of financial solutions we can offer customers and our broker partners to continue our belief that The Best is Yet to Come,” said Larry L. Mlynowski, Bennington’s founder and CEO. “Beyond ready access to cost-effective funding, we are culturally aligned with Equitable’s passion for service, commitment to independent distribution and their Challenger Bank philosophy. This business combination will enable us to continue our vision of being an innovative leader in Canada’s leasing industry.”
Equitable evaluated this transaction using several gating criteria including strategic fit with the Bank’s secured lending focus, alignment with Equitable’s risk appetite, management capability, expected financial impact, and the effect on the bank’s capital position.
“Our approach to deploying our balance sheet for acquisitions is disciplined and strategic,” said Moor. “Our detailed assessments all point to the inherent value of this transaction to both parties and to our shareholders. The investment exceeds our hurdle rate of return and results in immediate per share accretion. Additionally, the transaction will allow us to profitably deploy some of our excess common equity capital. We expect our CET1 ratio will decrease by approximately 0.7% after the acquisition. At that level, it will decline to the lower end of our operating range, but we are confident that we can rebuild our capital organically over the course of 2019. Equitable will also still have capital ratios that exceed regulatory standards and the levels of the other eight publicly listed Schedule I banks in Canada.”
Under the leadership of Larry Mlynowski, CEO and Troy Campbell, president and chief operating officer, Bennington will operate as a subsidiary of Equitable Bank. Equitable Group Inc. will report its results on a consolidated basis beginning in Q1/19.
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