Quite an example of public negotiating surfaced on Thursday, with a subprime auto finance company that’s been in operation for nearly 30 years being called “significantly undervalued.”
Auto Experience, a firm led by one of the founders of Exeter Finance and created in 2018 to pursue strategic business opportunities in the auto financing market, announced it has informed the board of directors of Consumer Portfolio Services of its interest in acquiring the company in an all-cash transaction.
The bid is valued at $135 million, and Auto Experience said the proposed acquisition at that price would nearly double the current value of the Nasdaq-listed company.
Auto Experience said it proposes to acquire CPS for approximately $6.18 per share of common stock. CPS shares closed at $3.35 on Wednesday, according to a news release.
In its letter to the company, Auto Experience asked for a response from the CPS board by Oct. 30.
CPS reported on July 21 that its second-quarter earnings totaled $3.0 million, or $0.13 per diluted share. Also during the quarter that ended on June 30, CPS indicated that it purchased $135.9 million of new contracts as its receivables totaled $2.326 billion.
In its letter to CPS, Auto Experience said it would add value to the company and its shareholders by re-engineering aspects of CPS’s operations, applying proprietary technology and enhanced digital capabilities as the market increasingly shifts online and employing a combination of existing resources and new leadership steeped in automobile financing and digital commerce.
“Acquiring Consumer Portfolio Services and leveraging our strategic and operational experience in auto financing and enterprise technology will create a strong national player that already has a toe-hold in more than 8,000 automobile dealerships across the U.S.,” Auto Experience president and chief executive officer Samuel Ellis said.
“CPS is significantly undervalued based on a range of performance measures and upside growth opportunities, and we believe our proposed acquisition would be materially beneficial to shareholders and, over the longer run, to consumers and dealers,” Ellis continued.
Ellis certainly is quite familiar with subprime auto financing.
Ellis was previously the founder and CEO of Dallas-based DriverUp, an online marketplace focused exclusively on auto finance. Earlier, he was founder and CEO of Exeter Finance. And for nearly a decade, Ellis served as senior vice president of risk management for GM Financial and AmeriCredit.