Enova To Buy OnDeck In $90M Stock And Cash Deal

Enova International plans to acquire online small-business lender OnDeck for some $90 million in cash and stock.

“This strategic transaction, which brings together two FinTech leaders, is a great opportunity for customers, employees and shareholders of both companies,” Enova CEO David Fisher said in announcing the deal. “Together, our companies will be stronger because of the complementary strengths and synergies of our businesses.”

OnDeck Chairman and CEO Noah Breslow added that “following an extensive review of our strategic options, we believe this is the right path forward for our customers, employees and shareholders.”

Under terms of the transaction, OnDeck stockholders will get 0.092 shares of Enova common stock and 12 cents in cash for each of their shares. The equals about $1.38 per share, or a 62.4 percent premium over what OnDeck closed at on Tuesday (July 28) prior to the deal’s announcement.

Both companies’ boards have unanimously given the deal the green light, although the tie-up remains subject to approval from antitrust regulators and OnDeck shareholders. However, the two firms expect the acquisition to close some time this year.

Enova said it plans to bring the OnDeck brand and offerings into its current lineup. The company said combining the two entities will offer meaningful scale and a wide selection of products in the small business and consumer markets that banks and credit unions have had challenges serving. OnDeck and Enova enjoyed a combined $4.7 billion in originations last year and have served roughly 7 million clients.

The deal comes some three months after activist investor Voce Capital urged shareholders to dump three members of the company’s board. Voce’s move came amid a big first-quarter loss and a 96 percent drop in the stock’s value since 2014.

Second-Quarter Earnings

Meanwhile, OnDeck reported its second-quarter results on Wednesday (July 29). The firm said loan originations plunged to $66 million, down some 89 percent from both the prior and year-ago quarter.

OnDeck said that reflected the company’s decision to “temporarily suspend originating new term loans and lines of credit” amid the COVID-19 pandemic.

“After curtailing originations in May, I am pleased that we are once again providing vital financing to our small business clients through our term loan and line of credit products, with a credit strategy calibrated to the new environment,” CEO Breslow said in a press release.

OnDeck also reported that interest and finance income for the second quarter totaled $78.3 million. Provisions for credit losses declined to $23.7 million from $107.9 million in the prior quarter and $43 million from the year-ago quarter.

As for its 2020 outlook, OnDeck withdrew its guidance on March 23 and said it’s not offering a revised forecast “due to the significant and ongoing uncertainties stemming from the COVID-19 pandemic.” However, the company said in general that it foresees a “modest net loss” for the third quarter.

All in, OnDeck reported adjusted net income of 23 cents per diluted share on gross revenue of $80.5 million. That beat the Zacks’ consensus estimate of a 45 cent per-share loss.