CIT Group to Acquire Direct Capital

Zacks Equity Research

CIT Group Inc. (CIT) continues to focus on its core business, as its subsidiary, CIT Bank recently inked an agreement to acquire Direct Capital Corporation. The Portsmouth, NH based Direct Capital specializes in small and middle market lending business.

The terms and conditions of the transaction were not divulged. The deal, subject to certain regulatory and contractual closing conditions, is expected to close in third-quarter 2014.

Following the financial crisis, CIT Group has undertaken measures to regain its foothold in the market. Intending to focus on its core operations, the company has disposed of unprofitable/non-core ventures spread globally. The recent development seems to be a strategic fit for the company as it complements its core business.

CIT Group plans to capitalize on Direct Capital’s expertise and technology platform in the small and mid-sized lending markets. Per the deal, Christopher J. Broom, Co-founder and Chairman of Direct Capital and James P. Broom, Chief Executive Officer of Direct Capital will continue to head the business.

Direct Capital, with assets worth $500 million, has served as a lender for over 80,000 customers offering about $2.25 billion for their business requirements. Therefore, the agreement will boost CIT Group’s existing portfolio as well as expand its current client base.

The deal will also benefit customers of Direct Capital allowing them access to CIT Group’s enhanced services and wide range of products.

Despite the dismal performance in the preceding two quarters, CIT Group remains an asset for yield-seeking investors given its dividend payouts and steady share repurchases. The company’s strong capital position will enable it to enhance shareholders value in the forthcoming quarters. Further, initiatives to restructure and streamline its businesses will continue to strengthen balance sheet position.

CIT Group currently carries a Zacks Rank #3 (Hold). Some better-ranked financial organizations include Cielo SA (CIOXY), Euronet Worldwide Inc. (EEFT) and Ladder Capital Corp (LADR). All these stocks sport a Zacks Rank #1 (Strong Buy).

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