Paragon Banking Group PLC (LON:PAG) is splashing out around £274mln to help diversify its business into other specialist lending markets.
The FTSE 250-listed firm is paying around £48mln to acquire Titlestone Property Finance Limited, a leading provider of residential development finance.
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To date Titlestone has committed over £2.2bn across more than 330 developments, with a strong repeat business rate and an outstanding credit record which, Paragon said, fits well its approach to lending.
The group said the transaction is expected to enhance Paragon's post-tax profits by a high single-digit percentage in its first full year.
It added that it will not change the group's stated dividend policy, but following the transaction, the remainder of the firm s 2018 share buy-back programme will be suspended, with future capital management plans being assessed at the year-end,
At the same time, Paragon is acquiring a portfolio of development finance loans for circa £226mln from a series of special purpose vehicle companies (SPVs).
The group noted that both Titlestone and the SPVs are owned by funds ultimately controlled by Oaktree Capital Management LP.
Diversifying income streams
Nigel Terrington, Paragon’s chief executive, said: "This acquisition demonstrates our continued progress in diversifying the Group's income streams into specialist lending markets.
“The UK development finance market represents an excellent long-term opportunity and Titlestone will enable us to accelerate our growth in this area.
Paragon also announced that it continues to trade in line with its expectations. The firm said it will issue a third-quarter trading update on 23 July 2018.