Proposed acquisitions

FOR IMMEDIATE RELEASE

1 March 2018

Arrow Global Group PLC

(“Arrow Global” and, together with its subsidiaries, the “Group”)

Proposed acquisitions of Europa Investimenti S.p.A (“Europa”) andParr Credit S.r.l. (“Parr”) (the “Acquisitions”) strengthening Arrow Global’s Italian presence

Arrow Global announces it has agreed terms for two acquisitions which strengthen the Group’s investment and asset management capabilities and reinforce its growing presence in Italy, a significant non-performing loan market where the Group is committed to expand prudently. 

The first is for Europa Investimenti S.p.A., a leading originator and manager of Italian distressed debt investments, for an equity value of €62 million. While the core Europa business is not regulated, due to Europa owning a 74% stake in an Italian real estate fund management company, Vegagest SGR S.p.A., the transaction is subject to a regulatory change of control approval by the Bank of Italy and is expected to complete in mid-2018. 

The second is for 100% of Parr Credit S.r.l., a leading Rome-based servicer of Italian non-performing loans (“NPLs”) for an equity value of €20 million. There are no regulatory approvals required for the transaction and the acquisition will complete today. 

The acquisitions will be funded in cash from existing Group resources and are expected to be broadly earnings neutral in 2018 and marginally accretive in 2019.

The acquisitions are expected to increase the weighting of capital-light asset management revenues, which as at 31 December 2017 account for 22% of the Group’s total revenues. 

Transaction details

Europa Investmenti

·   Arrow Global has agreed terms to acquire 100% of the shares of Europa Investimenti S.p.A. from Consival S.r.l. and Camargo S.r.l. (entities held by the existing Europa Investimenti management team) and to inject €11.5 million of new capital, equating to a total equity value of €62 million. 

·   Europa Investimenti Special Situations S.p.A. (“EISS”), a Europa Investimenti subsidiary which holds a portfolio of Italian luxury goods companies, is not being acquired and will be transferred out of the target group before completion.

·   €47 million of the €62 million purchase price will be paid on completion, €6 million 6 months following completion and €9 million over the five years post-completion.

·   In addition, an earn-out related to shares indirectly acquired from management is provided, which is capped at €19 million, dependent on business performance.

·   Europa invests in Italian companies going through the Italian court-administered administration and bankruptcy process, acquiring both assets and NPLs related to distressed companies. From inception in 2008 to 2017, it has completed 63 transactions.  Arrow Global’s Italian platform, Zenith, has master serviced Europa’s SPVs since 2015. 

·   It is the Group’s intent to scale Europa by institutionalising the NPL acquisition and management process, increasing its focus on capital-light asset management revenues.

·   The value of gross assets being acquired as part of the transaction as at the year ending 30 June 2017 (Europa financial year-end) was €63.2 million. with revenues of €23.6 million and €9.8 million profit before tax (both excluding the EISS business, which is not being acquired).

·   For the year ending 31 December 2017, normalised EBITDA was approximately €5 million, equating to an EV/EBITDA multiple of approximately 10x (based on €14 million net cash).

·   Europa’s Milan-based team will add approximately 35 employees to the Group. 

·    The Europa business will continue to be led by Stefano Bennati (CEO), Armando Ranucci (COO), Daniele Patruno (Co-Head NPL), Emanuele Urbinati (Co-Head NPL), Federico Silva (Business Development) and Claudio Nardone (Head of SGR).

·    On 27 February 2018, Arrow Global completed a ~€10 million investment in notes originated by Europa and backed by distressed debt assets that had been acquired by Europa, having previously acquired €5 million of Europa-originated notes (also backed by distressed debt assets) in August 2017.

Parr Credit

·   Arrow Global will acquire 100% of the shares of Parr from ERRE Holding S.r.l. for a purchase price of €20 million,with €15 million paid on closing and €5 million paid in the three years post-completion. 

·   Founded in 2005 by Raimondo Romitelli (current CEO), Parr has built a strong reputation and track record, underpinned by significant data and collections experience. 

·   Parr manages unsecured performing and non-performing loans and customer relationships for banks and Tier-1 telecommunications companies. It has deep expertise in valuing, migrating and collecting granular loan portfolios. 

·   Going forward, the Group will grow the financial services business of Parr with a focus on the servicing of Arrow Global and third party-owned NPL portfolios.

·   Parr also owns 20% of the equity in Parr Sh.p.k., Parr’s offshore servicing centre in Tirana.

·   At the year ending 31 December 2017, revenues were €17.5 million with normalised EBITDA of approximately €3 million, equating to a normalisedEV/EBITDA multiple of approximately 7x.

·   Parr’s Rome-based team will add approximately 200 employees to the Group.

·   Post-completion, the business will continue to be led by Raimondo Romitelli (CEO) and Antonio Giannitti (COO).

Lee Rochford, Group Chief Executive Officer of Arrow Global, commenting on both deals, said: 

“We are delighted to announce the proposed acquisitions of Europa and Parr. Both build on the successful 2017 acquisition of Zenith and give us valuable Italian primary and special servicing capabilities that support our growth ambitions. 

“Europa augments our capital-light asset management capabilities, with clear opportunities to offer this across our existing client base. The Group has completed a number of co-investments with Stefano Bennati and the Europa team, and we have been impressed with their expertise and ability to generate investment volume for the Group and its partners.

“Having looked at a number of acquisition opportunities in Italy, we have been very impressed with Parr’s long-standing customer relationships, deep collections expertise and proven migration capabilities. We see clear opportunities to offer Parr services across our existing client base.

 “These acquisitions deepen our commitment to Italy, Europe’s largest NPL market. With our leading positions in the UK, Portugal, the Netherlands and our recent entry into Ireland we continue to see the benefits of geographic diversification. There remain opportunities for growth across the European marketplace. 

“We are excited by these opportunities and we look forward to welcoming the Europa and Parr teams into the Group.” 

 Stefano Bennati, Chief Executive Officer of Europa, said: 

“With the support of the other Europa founders, Stefano Vegni and Roberto Tuzzami, who will continue to act as company ambassadors, we have a focussed business that will complement well Arrow Global’s existing Italian business. We believe this combination provides the enlarged Group with significant opportunity to grow in Italy. I and the rest of the team look forward to working with the Arrow Global management team going forward.”

 Raimondo Romitelli, Chief Executive Officer of Parr Credit, said: 

“We are delighted to be joining Arrow Global. We have built a strong business which will sit well in the Group’s investment and asset management capability set. We are a highly focused investment business and place great emphasis on underwriting and portfolio management. Our amazing team of employees have helped us achieve great results, and together with them I look forward to joining the Arrow Global Group. I would also like to thank the advisors of this transaction for their significant work.”

Forward-looking statements 

This announcement contains certain forward-looking statements with respect to certain of Arrow Global’s current expectations and projections about future events, including in relation to the Acquisitions and the enlarged group of Arrow Global, Parr and Europa (the “Enlarged Group”).

These statements, which sometimes use words such as “aim,” “anticipate,” “believe,” “intend,” “plan,” “estimate,” “expect,” “pro forma” and words of similar meaning, reflect the directors’ beliefs and expectations and involve a number of risks, uncertainties and assumptions (including the completion of the transactions described in this announcement) that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, the Group does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained in it. Readers should not place undue reliance on forward-looking statements, which speak only as at the date of this announcement. No statement in this announcement is or is intended to be a profit forecast or profit estimate or to imply that the earnings or other measures of performance of Arrow Global or the Enlarged Group for the current or future financial years will necessarily match or exceed the historical or published earnings or other measures of performance of Arrow Global. 

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