For OneMain shareholders, the tender offer made by IEG Holdings is nearing its term, with IEGH announcing that the final day for OMF shareholders to accept the offer will be June 15, 2017. For OneMain shareholders, the deal could help to replace what IEGH refers to as an antiquated model of doing business, and IEGH believes that shareholders should accept the tender offer or face long term uncertainty. As of yesterday’s close, the IEGH offer presented a premium in excess of 130% to the OMF share price.IEGH Could Change The Face Of OneMain
IEGH management has shown that the offering is not as inequitable as OMF has tried to claim. First, IEGH offers a far more efficient and current sales platform, utilizing on-line and social media presence to drive loan origination. OMF relies on mostly brick and mortar operations to conduct business, which IEGH points out is far more expensive and less likely puts OMF in a position to adapt quickly to market change and demand.
IEGH can bring a new identity to the current OMF model, which uses lengthy application processes. IEGH offers same day acceptance and funding to worthy applicants. The IEGH model uses strict underwriting standards and has demonstrated industry low loss levels with less than 13% of current loans in arrears in its loan book. IEGH, through its Mr. Amazing Loans product boast of the ability to facilitate application, loan documentation and funding completed 100% online and in most cases within minutes of submitting the application.
IEGH is debt free and cash flow positive. Additionally, IEGH has recorded strong revenue growth with 2016 revenue increasing 16.3% to $2.135 million. Insider ownership is extremely high with 71% of the outstanding shares owned by insiders, an amount that clearly aligns shareholder interest with that of company management.
The IEGH Take
While OMF shareholders may have been advised that the IEGH offer is undervaluing its company, the truth of the matter may be that OMF is, in fact, a wilting flower. The shift in the industry has been toward on-line application, approval and funding. OMF revenue growth has been idle and the balance sheet has weakened to do amortization and loan losses.
The terms of this deal are not unique to mergers and acquisitions. Recently, Bendon completed a merger with Naked Brands (NAKD) in a deal that has some similarities. For Bendon, the merger allows the company to expand aggressively in certain U.S. markets by utilizing the current listing of NAKD shares in the public markets. While Bendon market value dwarfed the market cap of NAKD, the deal offered accretive opportunities for Bendon to capitalize upon. The same may be true for OMF shareholders if they accept the deal.
Of immediate value would be for OMF to quickly assimilate its platform with IEGH’s and offer a business model that can come to terms with lending in the 21st century. Shareholders may want to look past the simple numbers associated to the deal, even though it offers a substantial premium to OMF share price, and acknowledge the strengths that a combined company can offer.
For shareholders that already tendered shares, the best outcome may be for others to join the deal and position OMF to be a leader in the industry, rather than relying on a business model that is losing market attention. For OMF shareholders that are looking for a renewed level of revenue growth and long-term opportunity, the IEGH offer may provide the solution needed.
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