Dive Brief:
- Chicago-based online lender Enova International is acquiring OnDeck Capital for $90 million, the purchaser announced Tuesday, according to Crain's.
- The deal gives Enova, which has specialized in high-rate loans to consumers, a bigger entry point into the less competitive and more lightly regulated online small-business lending space. When the deal closes, 60% of Enova's loans will be to small businesses, compared with 15% now, Enova CEO David Fisher told analysts Tuesday.
- OnDeck launched in 2006 and, a decade later, struck a partnership with JPMorgan Chase that enabled the nation's largest bank to offer online loans to small businesses. JPMorgan Chase ended that alliance in July 2019, saying it would continue offering small-business loans using its own platform.
Dive Insight:
The end of the JPMorgan partnership, coupled with the coronavirus pandemic, left OnDeck struggling. The company traded below $1 per share in mid-March and was threatened with delisting.
Before Tuesday's deal, OnDeck was pursuing a bank charter — a process Fisher said the combined company could explore if the deal closes. Enova and OnDeck said they expect the acquisition to be complete this year.
The $90 million acquisition breaks down to $8 million in cash, with the remainder in Enova shares. However, the sale price amounts to less than 10% of OnDeck's market value as of 2015, according to American Banker. The company took $94.5 million in losses in its first two years after going public in 2014.
OnDeck has seen a sharp uptick in late payments amid the pandemic. About 39.5% of OnDeck’s loans were at least 15 days past due at the end of June, compared with 10.3% in March, American Banker reported. The company temporarily stopped originating new loans in May.
Still, that hasn't dampened Enova's enthusiasm.
"The opportunity to partner with OnDeck and really double down or triple down in small business was not an opportunity we were going to pass by," Fisher said, according to Crain's.
Fisher will continue to lead the combined company. OnDeck CEO Noah Breslow will be a vice chairman at Enova and serve on the management team.
"Following an extensive review of our strategic options, we believe this is the right path forward for our customers, employees and shareholders," Breslow said in a press release. "Joining forces with Enova, a highly-respected and well-capitalized leader in online lending, and leveraging our combined scale and strengths, provides the best opportunity for our long-term success."
Enova and OnDeck combined to originate $4.7 billion in loans last year to more than 7 million consumers and businesses.
