Leading credit information and database provider Equifax Inc. (EFX) recently announced that the credit reporting operation of its Brazilian subsidiary has been merged with Boa Vista Servicos S.A., the second-largest consumer credit bureau in Brazil. Financial terms of the deal were not disclosed.
Equifax will jointly own Boa Vista along with its present Brazilian shareholders. Post merger, Equifax has a good chance of becoming the leading provider of consumer and commercial credit data to Brazilian business firms.
The combined entity will have access to copious consumer and commercial files and customers. To support new product development and other strategic growth initiatives, Equifax will also spend an additional $100.0 million.
We are encouraged by Equifax’ expansion strategy. During the recently concluded first quarter, management commented that it will focus on product innovation and broaden data assets through acquisitions and growing partnerships. We believe that the Brazil expansion is in line with management’s commentary.
In March, the company expanded its operations in the U.K. with the acquisition of Workload Financial Business Consultants Limited. The acquisition of Workload will enable Equifax to provide the broad insight into consumer behavior, financial status, capabilities of customers and market opportunities.
However, we were not very impressed with the company’s first quarter performance, which just about matched the Zacks Consensus Estimate on the bottom line and missed on the top line.
But we are optimistic about revenue growth prospects through the remainder of the year and improving margins in the second half. Then again, stiff competition from Automated Data Processing Inc. (ADP) is a concern.
Currently, Equifax has a Zacks #3 Rank, implying a short-term Hold rating.
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