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Arrow Global Group PLC Proposed acquisition of Mars Capital UK and Ireland and strategic partnership PDF Print E-mail
Thursday, 31 August 2017
Arrow Global announces the proposed acquisition of Mars Capital’s leading UK and Irish mortgage servicing businesses (“Mars Capital”), for an enterprise value of £15.5 million.  

The acquisition further strengthens Arrow Global’s asset management capabilities and reinforces its leading position in the UK, while providing a strategic entry into Ireland, a new market for the Group that offers significant debt purchasing and servicing potential.

In addition, Arrow Global is also pleased to announce the establishment of a strategic partnership in the UK and Ireland with Oaktree Capital Management, L.P. (“Oaktree”), a leading global asset manager with around USD$100 billion under management.

The transaction is subject to regulatory approval by the Financial Conduct Authority (“FCA”) and fulfilment of the Central Bank of Ireland notification obligations. It is expected to complete in late 2017.

Transaction details
Arrow Global has agreed terms to acquire Mars Acquisition Limited, the holding company of the Mars Capital UK and Ireland secured servicing platforms, from its owners for an enterprise value of £15.5 million.

Mars Acquisition Limited is the holding company for a group of businesses owned by funds advised by Oaktree and founders, Matt Gilmour and Alex Forrester. It comprises the Mars Capital UK and Irish secured servicing platforms (to be acquired by Arrow Global), an Irish property management business, a Spanish servicing platform and a UK mortgage origination business (the latter three businesses are not being acquired and will be separated-out before completion).

The acquisition will be funded in cash from existing Group resources, with £9 million paid on closing and the remainder paid on the fourth anniversary of completion. The transaction is expected to be broadly earnings neutral in 2018 and accretive in 2019. Transaction related expenses are expected to be approximately £1.2 million.

Highlights: Acquisition of Mars Capital

· Strategic acquisition of Mars Capital further strengthens Arrow Global’s specialist asset management capabilities, broadening its commercial reach in the UK and providing a strategic entry to Ireland, one of Europe’s largest and most sophisticated credit markets.
· Mars Capital provides servicing for mortgages covering 1st / 2nd lien residential, buy-to-let and SME commercial mortgages, and provides a full loan lifecycle servicing, from loan origination support to late stage recoveries and real estate sales, with particular focus on managing distressed mortgage NPLs.
· Mars Capital has proven securitisation origination, issuing and servicing expertise. It is rated as a primary and special servicer in the UK by Fitch Ratings, and is regulated by the FCA and by the Central Bank of Ireland.
· Mars Capital has built a first-rate reputation and track record, underpinned by strong data and collections experience.
· The acquisition produces a valuable source of contracted capital-light servicing revenue from existing portfolios, securitisations and Magellan Homeloans, a specialist mortgage originator, while providing immediate access to its proprietary IT platform, designed to service residential and small ticket commercial mortgage assets.
· As at 31 July 2017, Mars Capital was servicing over 10,000 customer accounts and had £1.6 billion of assets under management in UK and Ireland.
· For the year ended March 2017, Mars Capital generated revenue of £9 million and Profit Before Tax of £2 million.
· The acquisition further increases the weighting of capital-light asset management revenues, increasing this to approximately 30% of total Group revenues in 2018.
· Mars Capital’s highly experienced UK and Irish teams will add approximately 65 dedicated management and staff to Arrow Global’s team.

Highlights: Strategic Partnership with Oaktree Capital Management
· Arrow Global has entered into a strategic partnership agreement with Oaktree to acquire future UK and Irish residential mortgage portfolios together.
· Agreement will also ensure Oaktree’s existing UK and Irish residential mortgage assets continue to be serviced on Mars Capital’s servicing platform for an agreed time.
· Strategic partnership underlines Arrow Global’s on-going ability to innovatively secure new business from highly credible market participants.

Lee Rochford, Group Chief Executive Officer of Arrow Global, commented: “We are delighted to announce the proposed acquisition of Mars Capital’s UK & Irish mortgage servicing businesses as well as our strategic partnership with Oaktree. These agreements expand our European footprint, augment our capital-light asset management capabilities, provide further impetus to our profitable growth trajectory and are completely aligned with our strategic direction.

“We are seeing marked demand for servicing solutions that meet the diverse requirements of multi-asset and multi-jurisdictional credit portfolios. Mars Capital adds depth of expertise in the secured real estate market to our servicing offering and we see clear opportunities to offer this across our existing client base.

“The acquisition also opens up the Irish market, one of Europe’s largest NPL and servicing markets. With our leading positions in the UK, Portugal, The Netherlands and our recent entry into Italy we continue to see the benefits of geographic diversification. There remain opportunities for growth across the European marketplace.

“The strategic partnership with Oaktree demonstrates our innovative origination capabilities. The partnership will provide significant portfolio investment and asset management opportunities going forward in the UK and Ireland, strengthening Arrow Global’s highly visible earnings stream.

“We are excited by these opportunities and we look forward to welcoming the Mars Capital team to Arrow Global.”

Kevin Blake, Managing Director, Mars Capital, said: “We are delighted to be joining Arrow Global. With the support of Mars Capital’s founders, Matt Gilmour and Alex Forrester, we have built a strong, focused business in the UK and Ireland which will sit well in Arrow Global’s asset management capability set. We believe this provides the enlarged Group with significant opportunity. Like Arrow Global we are a customer-centric business and place great emphasis on service levels and customer outcomes. I and the rest of the team look forward to working with the Arrow Global management team going forward.”

Chris Boehringer, Oaktree Capital Management, said: “We recognise Arrow Global as one of the leaders in Europe in the secured and unsecured investment and servicing space and their breadth of expertise and servicing scale give us a partner who can work alongside us in the UK and Ireland as we seek to take advantage of future investment opportunities.”
 
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