Georgia-based Synovus Financial Corp. SNV turned out to be a potential buyer of the financial unit of outdoor goods retailer, Cabela's Incorporated CAB. Recently, the bank completed the purchase of Cabela's banking operation — World's Foremost Bank — which issues store-branded credit cards.
Further, the bank subsequently resells the credit-card portfolio to Virginia-based Capital One Financial Corporation COF, while holding back about $1.1 billion in deposits.
Per the terms, Synovus received $75 million from Cabela’s and Capital One. The bank will likely deploy the proceeds for funding, including balance-sheet restructuring activities, debt repayment and capital distribution.
Background
Bass Pro Shops — retailer of outdoor gear and apparel — was supposed to purchase the retail business of Cabela's in October 2016, while Capital One Financial was supposed to buy the banking unit. However, the deal did not materialize as the bank was undergoing the anti-money-laundering controls’ probe which delayed regulatory approvals.
Therefore, Cabela's sold the financial unit to Synovus, which holds $30 billion in assets and has 250 branches across the south.
Earlier in September, Synovus received the regulatory approval from the board of governors of the Federal Reserve System for the acquisition.
Nonetheless, the deal was also subject to the completion of the merger of Cabela’s and Bass Pro Shops, which has received regulatory approvals, as well as the nod from Cabela’s shareholders. Per the deal, Bass Pro acquired Cabela’s for $61.50 per share in cash, representing an aggregate transaction value of approximately $5 billion.
Conclusion
Synovus’ results have been quite decent in the last quarter. We believe the company’s focus on both organic and inorganic growth, together with cost-containment efforts, will gradually pay off and aid bottom-line expansion in subsequent years.
Moreover, the deal will likely provide additional liquidity for organic growth. This, in turn, will help the company achieve long-term targets, which include return on assets of 1% and efficiency ratio to remain lower than 60%.
Another finance company worth considering includes The PNC Financial Services Group, Inc. PNC, which recorded upward earnings estimate revisions over the last 60 days.
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