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Investor signals intent to ditch Credit Acceptance

SOUTHFIELD, Mich. (AP) -- A Connecticut investment firm has signaled that it wants to cash out its shares in a Michigan auto financing company.

Credit Acceptance Corp., based outside Detroit in Southfield, Mich., said Friday that it plans to buy back as many as 1 million shares. The company will buy the shares through a tender offer, meaning shareholders will be asked if they want to sell any of their shares back to the company.

The company said it wants to buy back the shares so it can return money to shareholders after enjoying healthy profits. But one of the board members, Scott Vassalluzzo, plans to try to sell back as much as 200,000 shares. The Greenwich, Conn., firm where he is a managing member, Prescott General Partners, will also put its 3.8 million shares up for sale. Prescott's holdings represent about 15 percent of the company's stock.

Credit Acceptance acknowledged that if Vassalluzzo and Prescott General Partners put their combined 4 million shares up for sale, it's likely that "only a limited number" of the other larger shareholders would be able to sell their shares.

The company said it would pay $84.45 per share; that's slightly below Thursday's closing price of $84.74.

If shareholders do try to sell back more than the 1 million shares that the company has offered to buy — a scenario that seems almost certain given the stated intentions of Vassalluzzo and General Partners — then the company will tweak its approach: It will buy back at $84.45 per share from investors who own fewer than 100 shares, and will buy back shares from larger shareholders on a pro-rated basis.

The company said that no other officers or board members have indicated that they plan to sell their shares. The company said it is not making recommendations to shareholders about whether they should sell or hold onto their shares. The tender offer will expire June 29.

Credit Acceptance describes itself as an "indirect auto finance company" and says it works with car dealerships to help them sell cars to customers on credit "regardless of their credit history." Credit Acceptance and similar companies says they provide an important service to people who wouldn't otherwise be able to buy cars. Critics have questioned whether the industry gives loans to people who can't afford them.

Shares fell 2.4 percent in morning trading, to $82.70 amid a broader market sell-off. Over the past year, shares have traded between $56.55 and $107.09.