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First Cash, Cash America merging to form giant pawnshop company

Cash America will continue to operates pawn shops under its name, like this one on Camp Bowie Boulevard in Fort Worth, after its merger with First Cash.
Cash America will continue to operates pawn shops under its name, like this one on Camp Bowie Boulevard in Fort Worth, after its merger with First Cash. dkent@star-telegram.com

Tarrant County’s two big pawnshop companies — Fort Worth-based Cash America International and Arlington-based First Cash Financial Services — said Thursday that they will merge to create an industry leader.

The new company, to be called First Cash, will be based in Fort Worth at the home of Cash America, off West Seventh Street near downtown. Once the all-stock transaction has closed, the new entity will have more than 2,000 locations in four countries and an estimated market value of $2.4 billion, the companies said.

Rick Wessel, chairman and CEO at First Cash, will become vice chairman and CEO of the combined company. Brent Stuart, president and CEO at Cash America, will become president and chief operating officer. And Dan Feehan, the longtime former CEO at Cash America who is now chairman, will be executive chairman of the merged company.

“Both companies have strong brands, broad market presence and teams of talented people,” Feehan said in a statement. “This is an exciting opportunity to redefine leadership in our industry.”

Cash America, founded in 1983, is the largest pawnshop chain in the U.S., with nearly 900 lending locations in 20 states. First Cash, founded in 1988, is the No. 3 player in the U.S., with more than 330 stores, but also operates 936 pawnshops in Latin America, where it has been growing. In 2014, it acquired 47 locations in Mexico from Cash America.

According to a report last year from Tulane University’s A.B. Freeman School of Business, Cash America controls more than 14 percent of the U.S. pawnshop market, while First Cash has close to 5 percent.

Executives said the companies’ retail operations are complementary, with little overlap of stores or markets. They plan to continue operating the two chains under their existing names and don’t anticipate closing stores.

“This basically picks up 12 new states for First Cash. It picks up six new states for Cash America,” Stuart said.

But there could be some job cuts as the companies consolidate headquarters operations. Executives estimated that the merger will produce $50 million in cost savings within 24 months. About $35 million of that “will come from areas that you would typically expect when combining two organizations, including areas involving technology platforms, finance and other administrative functions,” Doug Orr, chief financial officer at First Cash, said during a conference call with analysts.

Cash America has about 245 employees at its Fort Worth headquarters near the Trinity River, and First Cash has 88 employees at its current home on East Lamar Boulevard in Arlington.

Executives decided to place the new company in Fort Worth because Cash America owns its building there and has available space.

“We’re just renting our space in Arlington,” Wessel said. “It only makes sense that we’ll be migrating 15 miles down the road to Cash America’s building.”

The deal calls for Cash America shareholders to receive 0.84 share of First Cash stock for each share they own. After the transaction, First Cash shareholders will own about 58 percent of the combined company, and Cash America shareholders will own 42 percent.

The deal is expected to close in the second half of 2016.

With federal, state and local regulators further restricting payday lending in recent years, Cash America and First Cash have retreated from that business to focus on their pawn stores. Pawnshops, where consumers borrow against jewelry and other belongings, are expected to be exempted from new payday lending restrictions that the U.S. Consumer Financial Protection Bureau is expected to unveil this spring.

The announcement came as Cash America announced first-quarter earnings of $10.6 million, up 36 percent from 2015 when it logged reorganization expenses. Consolidated total revenue increased 2 percent to $277.2 million.

On Wall Street, Cash America (ticker: CSH) gained a penny a share to close at $40.71. First Cash (ticker: FCFS) also gained a penny to $48.70.

This report includes material from Bloomberg News.

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