Toronto-Dominion Bank has agreed to buy VFC Inc. for $326-million in a cash-and-stock deal that will give the Canadian bank a foothold in the car-loan market.
TD said it will pay $19.50 a share for VFC — $19.45 in stock and 5 cents a share cash. The offer is 38 per cent higher than VFC's Wednesday closing price yesterday of $14.15.
TD stock climbed 15 cents or 0.23 per cent to $64 on the Toronto Stock Exchange Thursday. Shares of VFC soared $5.15 or 36.40 per cent to $19.30.
Toronto-based VFC specializes in non-prime automotive purchase financing, helping consumers whose credit rating is not good enough to get a car loan from most major banks. The company's shares have soared since its initial public offering in October, 2003.
The purchase is expected to be neutral to TD's earnings in 2006 and "modestly accretive" by 2007, the bank said.
TD also said that VCF will continue to operate under its existing brand and management structure.
VFC has offices in Toronto, Montreal and Nanaimo, more than 220 employees, and a portfolio of $380-million. The company's senior management team and other shareholders, with about 29 per cent of VFC's common shares, have agreed to tender their stock to the offer.
"This acquisition is a logical extension of our existing business as a leader in dealer-based automobile financing and an opportunity for us to increase our range of product offerings in response to what dealers and their customers have said they want," TD said in the release.
The offer has been unanimously endorsed by the VFC board, and management and other shareholders owning 29 per cent of the company have entered into lockup agreements to tender their stock.
The arrangement includes a $9.25-million break fee if VFC reverses its acceptance.
© The Globe and Mail
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