IEGH responded swiftly and with determination on Monday after OneMain Holdings made a public statement calling IEGH's bid to acquire all of the outstanding shares of OneMain stock as "grossly inadequate". Our partners at Trade Ideas provided a real time news alert after hours, bringing the IEGH response to our news desk.
IEGH Disagrees And Makes Case For Acquisition
Despite the strong rhetoric from management at OneMain Holdings, IEGH Chairman and CEO, Paul Mathieson, strongly disagrees with OneMain's sentiment and insists that OneMain shareholders should be afforded a say in the matter.
Despite the difference in company valuation, IEGH may, in fact, be offering a better method of conducting business. In a generation where brick and mortar concepts are falling by the wayside, as evidenced by the continued erosion of mega-retail giants like Macy's, Limited, and Aeropostale, IEGH's belief that brick and mortar is becoming an antiquated method of conducting business is not without merit.
IEGH is bringing their case to all shareholders, offering a compelling value proposition to OneMain and IEGH shareholders, citing a plan to accelerate a route to transition from the archaic OneMain brick and mortar business model, to the modern online-only method of lending that IEGH is successfully implementing across the United States.
IEGH is making a case that by failing to take the offer seriously, the OneMain board of directors demonstrates that they remain out of touch with the trend in the industry and may place the company at risk, as the online lending sector continues to consolidate and will likely make continued profitability difficult for brick and mortar concepts.
IEGH Tells Investors Why
According to IEGH, key benefits of combining IEG Holdings and OneMain include:
- Significant business synergies from combining the two businesses, including estimated cost savings of at least $1 billion per year from transforming the OneMain brick and mortar business model to IEG Holdings' 100% online only distribution business model, resulting in the closure of over 1,700 OneMain offices, termination of over 11,000 employees, substantial cuts in advertising/marketing costs, and other significant cost cutting measures, including a cut in the Chief Executive Officer's annual base salary to $1 per year and reduction in aggregate annual executive compensation by at least $40 million.
- Improvement in combined business from re-branding of OneMain to the Mr. Amazing Loans brand, termination of low margin OneMain business segments with a new focus on high margin unsecured loans to near prime clients, focus on refinancing of existing high quality OneMain customers and termination of lending to sub-prime OneMain customers with FICO score of less than 600 to reduce OneMain loss levels.
IEGH Urges Negotiation
From its release, IEG Holdings urges OneMain to enter into negotiations with IEGH, rather than simply dismiss the synergies of transitioning its customers online and $1 billion per annum of cost savings that could be obtained from a merger of the two companies.
On January 5, 2017, IEG Holdings commenced a tender offer to purchase up to all of the outstanding shares of OneMain's common stock, provided, however, that IEGH is willing to accept any number of shares of OneMain common stock, even if such shares, in the aggregate, constitute less than a majority of OneMain's outstanding common stock. IEG Holdings is offering to exchange two shares of IEGH common stock for each outstanding share of OneMain common stock.
Paul Mathieson, IEGH Chairman and Chief Executive Officer, said, "We ask OneMain shareholders to consider whether they wish to move forward with an online business model aimed at the future or continue to support an outdated 'brick and mortar' model. We are surprised by OneMain's dismissive response to IEGH's offer. The response highlights the importance of our offer as history is littered with the relics of archaic 'brick and mortar' business models being overrun with an improved online variant, for example 'Netflix' versus 'Blockbuster'."
IEGH Reasons for the Offer
In a statement, IEGH said that the IEGH Board strongly refutes certain OneMain assertions and confirms that there is significant strategic rationale for combining IEG Holdings and OneMain. The two businesses are complementary with a similar core personal loan product (albeit delivered online by IEG Holdings), competing for similar customers in 19 of the same 43 states. IEG Holdings believes that significant shareholder value would be created by eliminating the majority of the redundant staff and office cost structure of the outdated OneMain business model while transitioning the existing customer base to the IEG Holdings online distribution business model.
Consummation of the offer is conditioned upon satisfaction of certain customary conditions. Shares that are tendered pursuant to a notice of guaranteed delivery but not actually delivered to the depository and exchange agent for the tender offer, Computershare Trust Company, N.A., prior to the expiration time of the offer will not be deemed to be validly tendered into the offer unless and until such shares underlying such notices of guaranteed delivery are delivered.
The offer is scheduled to expire at 12:00 Midnight Eastern time on Monday, February 6, 2017, unless the offer is extended or earlier terminated.
CNA Finance will keep followers apprised of further and real-time developments.
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