Italy's illimity buys loan specialist AREC for 40 million euro EV

MILAN (Reuters) - Italy's illimity Bank has agreed to acquire Aurora Recovery Capital (AREC), a specialist in managing 'unlikely to pay' (UTP) loans, for an enterprise value of 40 million euros ($42 million), it said on Wednesday.

The digital lender and bad loan specialist sees a positive impact on its pre-tax profit of around 8 million euros in 2023 and about 11 million euros in 2025 from the deal for AREC, a company focused on corporate real estate.

AREC is the third largest servicer on the Italian corporate UTP market with 2.1 billion euros of third party loans under management and an average gross book value of single positions of around 30 million euros, illimity said in a statement.

AREC is currently owned by institutional investors Finance Roma and GWM Group Holding, both with a 40% stake, and Oxalis Holding which holds the remaining 20%.

Challenger bank illimity also reported net profit of 15.7 million euros in the first three months of the year, up by 25% on a year ago.

Italy's debt collection sector is under pressure to consolidate and reduce costs because flows of new impaired loans are dwindling after the country's lenders completed a large scale balance sheet clean-up.

Illimity plans to integrate its neprix unit with AREC to create a complete player in the servicing of corporate distressed credit with over 9 billion euros of loans under management, of which more than 3 billion euros regard UTP corporate loans.

Illimity will pay for the transaction through a 36 million euro capital increase reserved to AREC while the remaining 4 million euros will be paid in cash.

Following the deal, the current shareholders of AREC will hold indirectly around 3.4% of illimity’s ordinary share capital.

Marco Sion Raccah, current AREC general manager, will have the same role in the new company arising from the integration between neprix and AREC.

The closing of the deal is subject to completion of the authorization process and illimity's shareholder meeting on the capital hike expected by the summer.

($1 = 0.9483 euros)

(Reporting by Cristina Carlevaro, editing by Keith Weir)