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First Cash expands pawn shop operations in Latin America

Pawn shop operator and lender First Cash Financial Services Inc. has acquired 211 full-service pawn stores in Mexico, Guatemala and El Salvador from a private Mexican ownership group, the Arlington-based company said Jan. 6.

The transaction, with a net cash price of $45 million, is being funding with available Mexican peso cash balances generated from First Cash operations in Mexico.

The company also is assuming $7 million in debt from the acquisition, which it expects to pay off within the next 90 days.

The acquisition includes 166 pawn locations in Mexico, 32 pawn stores in Guatemala and 13 pawn shops in El Salvador. The acquired stores located in Mexico are in 18 states primarily in central and southern Mexico. The acquisition will expand the company’s presence into three new states in southern Mexico. First Cash will now have pawn operations in all 31 states in Mexico and its Federal District.

As of Jan. 6, First Cash owned and operated 1,247 stores in the U.S., Mexico and Guatemala, including 877 store locations in Mexico.

“We believe this is a prime use of the excess cash we have generated from our operating profits in Mexico. Including this acquisition, over the last four years we have generated and deployed over $1.8 billion pesos, which translates to over $120 million U.S. dollars, into new stores and strategic acquisitions in Latin America,” said First Cash CEO Rick Wessel.

The acquired operation is based in Mexico City and has been in business since 1999. It started as a jewelry-focused pawn business, but has transitioned to a full-service lending and retail model by opening large format stores and focusing on general merchandise items, which now account for more than 60 percent of its pawn collateral, according to Wessel.

The added stores in Guatemala and El Salvador expands First Cash Financial’s store base into the first Latin American countries outside Mexico. Including these acquisitions, the company’s

Latin American operations will have 922 total store locations, of which 309 were acquired in five separate transactions and 613 were de novo store openings.

“First Cash continues to grow in both Latin America and the U.S. through a combination of new store openings and strategic acquisitions. With 1,260 total locations including this acquisition, we believe we are the clear market leader in the pawn industry,” Wessel said. “We believe this acquisition is a significant step in building the platform for our long-term Latin American growth strategy into additional markets in Central and South America.”

The transaction closing is being accomplished in three stages. The stores in Guatemala and Mexico closed on Dec. 31, 2015, and Jan. 6, respectively, while the closing of the El Salvador stores is expected by the end of January. The company expects the acquisition to be accretive to earnings in 2016 and potentially more accretive in 2017.

First Cash expects to announce fourth quarter and full year 2015 financial results and earnings guidance for fiscal 2016 on Jan. 28.

Founded in 1988, First Cash focuses on serving cash and credit constrained consumers through its retail pawn locations, which buy and sell a variety of jewelry, electronics, tools and other merchandise, and make small customer pawn loans secured by pledged personal property.

First Cash Financial Services Inc., based in Arlington, is traded on the NASDAQ under the symbol FCFS.

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