Benzinga | Feb 22, 2021 07:39AM EST

NextPoint Acquisition Corp. Announces Acquisition Of Liberty Tax From Franchise Group At Enterprise Value Of $252M

* Concurrent acquisitions of leading tax return preparation service provider (Liberty Tax) and established consumer and small business lender (LoanMe), resulting in over 1.6 million combined current customers across North America and establishing a diversified financial services platform with immediate scale for NextPoint's consumer and small business customers

* Cutting edge digital platforms and approximately 2,700 locations across North America position NextPoint for an omni-channel roll-out of small business loans and new products including mortgages

* Pro forma combined total enterprise value of US$643 million; 2021 pro forma combined revenue of US$317 million; and 2021 pro forma combined adjusted EBITDA of US$100 million

* US$25 million fully-committed PIPE led by hedge fund veteran Leon Cooperman, with participation by NextPoint's current and post-closing management

* The acquisitions are fully supported by financing commitments and are expected to close in Q2 2021

TORONTO, Feb. 22, 2021 /CNW/ - NextPoint Acquisition Corp. (TSX:NAC) (TSX:NAC) ("NextPoint"), a publicly traded special purpose acquisition corporation (SPAC), announced today that it has entered into definitive agreements to acquire Liberty Tax and LoanMe. The combined business, to be named NextPoint Financial Inc., will be led by industry veterans Brent Turner, as Chief Executive Officer, and Andy Neuberger, as Chairman.

Founded in 1997, and with over 1.6 million returns prepared annually, Liberty Tax is the third largest institutional tax preparation service provider in the United States, and the second largest provider of such services in Canada. Liberty Tax's core products include tax preparation for individuals and small businesses, and tax-related financial products such as prepaid debit cards and refund transfer products. Liberty Tax offers services at its approximately 2,700 franchised and owned locations as well as through online solutions. Liberty Tax is currently owned by Franchise Group, Inc. (NASDAQ:FRG), an operator of franchised and franchisable businesses.

Founded in 2014, LoanMe is a well-established, tech-enabled, consumer and small business lender that has originated over US$2 billion of loans to more than 340,000 borrowers. Its current product suite includes consumer installment loan offerings of between US$1,000 and US$20,000, and small business and merchant cash advance loans up to US$100,000.

The combination of Liberty Tax and LoanMe positions NextPoint to become a leading one-stop financial services superstore destination for credit-challenged consumers and small businesses, a customer demographic generally overlooked by traditional financial institutions. The combination of Liberty Tax and LoanMe provides the anchor for a platform which NextPoint intends to expand with an array of financial products and services. Through increased financial connectivity with its customer base, NextPoint expects to strengthen and expand its customer relationships, grow its revenue sources and drive value to its investors.

"We founded NextPoint to build a financial services platform for those that are underserved by traditional financial institutions, and we have executed on that plan. The combination of Liberty Tax and LoanMe, represents the first step, with immediate scale, towards achieving our goal. NextPoint's founders and the leadership teams at both Liberty Tax and LoanMe are equally committed to fulfilling our vision of becoming a one-stop financial services destination for our customers, and I am thrilled to partner with this highly-driven team as we continue to execute on that vision," said Andy Neuberger, Chairman of NextPoint.

"With over 1.6 million combined customers today, our extensive distribution platform will enable us to service main street consumers and small businesses both digitally and through our 2,700 franchised and owned locations across North America. We believe our hard-working customers deserve a personal and frictionless experience when addressing their financial needs, and access to an appropriate suite of financial products and services. NextPoint intends to provide that experience and access to help our customers reach the "nextpoint" in their financial goals. I am tremendously excited, for both our customers and our investors, by the opportunities presented in bringing together these two dynamic companies and management teams," said Brent Turner, who will lead NextPoint as its Chief Executive Officer.

Investment Highlights

* Countercyclical business model and resilient year-round operations -- diversified fee and lending revenue: consumer lending (36%); tax preparation (26%); small and medium-sized enterprise ("SME") lending (16%); and other services/new product roll-outs (22%)

* Enormous market of underserved consumers and small business -- more than 155 million U.S. tax filings in 2019, growing consistently at 1.14% per year with 58% of filed returns using paid tax preparation services; 30 million SMEs in the U.S., generally underserved by traditional financial institutions

* Massive cross-selling opportunities -- immediate impact of access to combined businesses' full suite of products and services by 1.6 million legacy businesses' combined customer base; built in customer base for new product and service offerings

* Significant growth potential -- anticipated new products and services, built organically or through acquisitions in a largely fragmented industry, include mortgages, point of sale lending, lines of credit, mobile app subscription services, auto finance, mobile banking, debt resolution and financial health services

* Robust and scalable technology platform -- combined IT infrastructure investment of over US$21 million by acquired businesses during past two years; multi-platform accessibility, instant loan funding, real-time processing and analytics, and fully-integrated datastores, all hosted on premier, cloud-based platforms designed to serve customers conveniently online, through mobile or in-person

* Strong risk management and compliance focused culture -- robust underwriting capabilities to drive attractive risk-adjusted yields developed through 340,000 loans funded by LoanMe

* Veteran leadership team --Liberty Tax and LoanMe senior management to lead operations and growth under guidance of NextPoint board steeped in finance, retail and franchising expertise

Transaction Highlights

NextPoint will acquire Liberty Tax (the entirety of its business, which is operated in both the United States and Canada) at an enterprise value of approximately US$252 million, US$182 million of which is payable in cash and the balance of which is payable in NextPoint common stock equivalents and subject to adjustment.

NextPoint will acquire LoanMe at an enterprise value of approximately US$102 million, US$18 million of which is payable in cash, approximately US$49 million of which is payable in NextPoint common stock equivalents and with the balance of which reflects the assumption of existing corporate net debt at LoanMe.

The cash portion of the purchase prices payable in the Liberty Tax and LoanMe transactions will be funded with cash remaining on deposit in the escrow account holding NextPoint's IPO proceeds and, to the extent necessary, any combination of the proceeds of the fully-committed US$25 million PIPE, and advances against the new, fully-committed US$200 million revolving credit facility, each discussed below.

The acquisitions, which are each subject to customary closing conditions, are expected to close contemporaneously in the second quarter of 2021. The transactions remain subject to satisfaction or waiver of certain customary closing conditions including among other things, the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the approval of the Toronto Stock Exchange recognizing the transactions as NextPoint's qualifying acquisition, and the issuance of a receipt for a final prospectus on behalf of Canadian securities regulatory authorities.

PIPE Transaction

NextPoint has received commitments to purchase US$25 million of NextPoint common stock equivalents at a price of US$10 per share. The PIPE issuance will occur in conjunction with the closing of the Liberty Tax and LoanMe acquisitions but is not a condition to the closing of such transactions. The PIPE investment is led by hedge fund veteran Leon Cooperman, and includes Andy Neuberger, Brent Turner and members of NextPoint's board of directors. PIPE proceeds are available for NextPoint's general corporate purposes, including to fund the Liberty Tax and LoanMe cash consideration, and to fund potential future acquisitions. The PIPE is subject to the approval of the Toronto Stock Exchange.

New US$200 million Revolving Credit Facility

NextPoint has obtained a commitment for a new US$200 million revolving credit facility, advances under which may be used for NextPoint's general corporate purposes, including to fund the Liberty Tax and LoanMe cash purchase prices, and to fund potential future acquisitions.