WASHINGTON (AP) — The federal government is ordering personal finance company Springleaf Holdings to shed 127 branches in 11 states in order to acquire OneMain Financial Holdings.
The required divestiture, announced Friday, would settle an antitrust lawsuit filed by the U.S. Justice Department and attorneys general in seven states. The suit alleged that Springleaf's $4.25 billion acquisition of OneMain, a Citigroup subsidiary, could hurt competition because people with weak credit seeking personal loans would face fewer local market choices in 11 states.
Springleaf, based in Evansville, Indiana, and Baltimore's OneMain are the two biggest makers of personal installment loans to subprime borrowers in the U.S., according to the Justice Department. The loans are marketed to consumers with limited access to credit from conventional banks, and have fixed interest rates and payment periods.
Springleaf said it has agreed to sell the 127 branches — representing 6 percent of its total network — to Lendmark Financial Services of Covington, Georgia. The sale is expected to close around April 1, 2016.
Springleaf and OneMain both specialize in large installment loans from $3,000 to $6,000, target the same customer base, and have substantial geographic overlap in their branch networks, the antitrust suit alleged.
Springleaf has about 830 branches in 27 states and outstanding loans worth around $4 billion. OneMain has 1,139 branches in 43 states and $8.4 billion in outstanding loans.
The 11 states are Arizona, California, Colorado, Idaho, North Carolina, Ohio, Pennsylvania, Texas, Virginia, Washington and West Virginia. The attorneys general of Colorado, Idaho, Pennsylvania, Texas, Virginia, Washington and West Virginia joined the suit.
The settlement must be approved by a federal court in Washington. Springleaf said it expects the acquisition to be completed soon after court approval.
The combined company, to be named OneMain Holdings Inc., will have nearly 1,850 branches in 43 states following the sale of the 127 branches to Lendmark, Springleaf said in a news release Friday. It will be headed by Springleaf President and CEO Jay Levine and run from Springleaf's executive office in Connecticut.
The new company is expected to have core net income in 2017 of $830 million to $900 million, or $6.20 to $6.70 per share, Levine said in a statement.