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First Cash Financial Services and Cash America International to Combine in Merger of Equals to Create Leading Operator of Retail Pawn Stores in the United States and Latin America

ARLINGTON, Texas & FORT WORTH, Texas, Apr 28, 2016 (BUSINESS WIRE) -- First Cash Financial Services, Inc. FCFS, +2.23% a leading international operator of retail pawn stores in Latin America and the United States, and Cash America International, Inc. CSH, +2.18% a leading operator of retail pawn stores in the United States, today announced that they have entered into a definitive merger agreement under which the two companies will combine in a tax free, all-stock transaction. The pro-forma market value of equity of the transaction is valued at approximately $2.4 billion, based on the current shares outstanding and the closing stock price on April 27, 2016 for both companies.

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The combined company, to be named FirstCash, will have one of the largest retail pawn store footprints in Latin America and the United States, with over 2,000 locations across four countries. The robust cash flows and financial strength of the merged companies will allow for greater capital returns to shareholders in the form of increased cash dividends and further stock buybacks as well as for continued expansion in Latin America.

“This is a transformational combination that creates compelling growth and value creation opportunities for both companies’ stakeholders,” said Rick Wessel, Chairman and Chief Executive Officer of First Cash. “The increased scale resulting from this combination will enable us to serve more consumers in more markets than ever before. We will also benefit from significant run-rate synergies and robust cash flows that will enhance our ability to pursue expansion plans in the Latin American region, which we expect to be our primary store growth vehicle,” Wessel concluded.

“In addition to combining two complementary businesses, our merger with First Cash brings together two organizations with a shared commitment to providing attractive products, services and solutions for under-banked and value-conscious consumers,” said Brent Stuart, Cash America President and Chief Executive Officer. “All of us at Cash America are thrilled to partner with First Cash as we enter into this new chapter for our company that we believe will drive value for our shareholders and the customers we serve,” Stuart concluded.

Dan Feehan, Executive Chairman of Cash America, said, “Both companies have strong brands, broad market presence and teams of talented people, which the combined company will build on to capture the significant upside this partnership creates. This is an exciting opportunity to re-define leadership in our industry.”

FirstCash: A Strong Platform with Experienced Management; Well Positioned for Growth and Value Creation

  • Proven Leadership Team: FirstCash will be led by a proven leadership team that reflects the strengths and capabilities of both companies, including a successful integration track record involving nearly 450 store acquisitions since 2013. Mr. Feehan will serve as Non-Executive Chairman, Mr. Wessel as Vice Chairman and Chief Executive Officer, and Mr. Stuart as President and Chief Operating Officer. Doug Orr, Executive Vice President and Chief Financial Officer of First Cash, will serve as Executive Vice President and Chief Financial Officer of FirstCash. The combined company’s board of directors will be comprised of seven directors, three of whom will be designated by First Cash, three by Cash America and a former First Cash director endorsed by Cash America.
  • Scale and Geographic Reach: The combined company will have operations in four countries, including almost 1,200 stores in the United States, and 936 Latin American locations that will represent 45% of FirstCash’s stores. The majority of new store growth is expected to be in Latin American markets. On a pro forma basis, FirstCash would have first quarter 2016 LTM revenues of approximately $1.75 billion. Pawn operations will continue to be the primary focus of the combined company, with 94% of the combined company’s expected revenue mix coming from pawn-related merchandise sales and pawn service fees.
  • Significant Run-Rate Synergies: The increased scale afforded by the combination is expected to generate approximately $50 million of annual run-rate synergies within the first 24 months after the closing of the transaction, primarily from efficiencies related to technology platforms, finance and reporting functions, and other administrative functions.
  • Significantly Accretive to Earnings: Looking at standalone expectations, the transaction would be 10% accretive to First Cash’s expected earnings per share in 2017 and 35% accretive to Cash America’s expected 2017 earnings per share.
  • Capital Returns to Shareholders: FirstCash intends to return capital to shareholders via quarterly cash dividend payments and stock buybacks. While subject to the approval of the combined company’s board of directors, it is expected that the new company will pay an annual cash dividend of $0.76 per share, paid quarterly, which is approximately 50% greater than First Cash’s current dividend policy and approximately 100% greater than Cash America’s current dividend policy.
  • Strong Cash Flow and Financial Flexibility: The combined company’s pro forma robust cash flows and balance sheet provide the financial strength to support continued expansion into Latin American markets in addition to a return of capital to shareholders through cash dividends and buybacks. FirstCash’s strong credit profile is expected to lead to lower long-term financing costs.

Terms and Additional Details

Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, Cash America shareholders will receive a fixed exchange ratio of 0.84 First Cash shares for each Cash America share they own. Following the close of the transaction, First Cash shareholders will own approximately 58% of the combined company, and Cash America shareholders will own approximately 42%.

Following the closing of the transaction, FirstCash will be headquartered in Fort Worth, Texas.

Pending completion of the transaction, both companies expect to continue to pay quarterly cash dividends under each company’s existing dividend policy and respective stock repurchase programs will be...