On Monday, Portfolio Recovery Associates Inc. (PRAA) announced the acquisition of Mackenzie Hall Holdings Ltd., a Scotland-based debt purchase and collection company. Portfolio Recovery paid approximately £33.5 million ($51.0 million) for the purchase of 100% ownership stake in Mackenzie Hall. Additionally, the company made long-term agreements to hire Mackenzie Hall’s management team, including the CEO.
Portfolio Recovery earns over 80% of its revenues from the recovery of receivables. As Mackenzie Hall specializes in collection of accounts receivables for its clients, which comprise of banks, credit providers and debt purchasers, the company is perfectly compatible with the operations of Portfolio Recovery.
The takeover is expected to boost Portfolio Recovery’s revenues, expand its geographic presence and increase its competitive strength against peers such as Asta Funding Inc. (ASFI) and Encore Capital Group Inc. (ECPG). The company expects the acquisition to be accretive to its earnings from the current quarter itself.
Over the past years, several significant acquisitions have enabled Portfolio Recovery to expand beyond its primary debt collection business into government collections and auditing, asset recovery and monitoring and filing of class action claims. However, the company does not depend solely on acquired units for expansion. It has also been witnessing substantial organic growth.
Earlier, in November 2011, Portfolio Recoveryannounced the creation of a new subsidiary – PRA Professional Services, LLC, to expand its audit and revenue recovery services for the private sector. The new company was created as a wholly-owned subsidiary of the group company and marked its initial foray into private sector auditing.
The Zacks Consensus Estimate for Portfolio Recovery’s fourth quarter earnings stands at $1.52 per share, up 26% over the year-ago quarter. The earnings for 2011 and 2012 are expected to be $5.78 and $6.95, respectively.
Currently, Portfolio Recovery carries a Zacks #3 Rank, implying a short-term ‘Hold’ rating. Based on the fundamentals, we maintain our long-term ‘Neutral’ recommendation on the shares of the company.
ASTA FUNDING (ASFI): Free Stock Analysis Report
ENCORE CAP GRP (ECPG): Free Stock Analysis Report
PORTFOLIO RCVRY (PRAA): Free Stock Analysis Report
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