Shares in UK's Paragon surge on Five Arrows Leasing deal

LONDON, Oct (HKSE: 3366-OL.HK - news) 2 (Reuters) - Shares (Berlin: DI6.BE - news) in British buy-to-let mortgage lender Paragon Group rose 10 percent on Friday after it said it had bought asset finance business Five Arrows Leasing from Rothschild & Co (LSE: 0FPB.L - news) .

The acquisition of Five Arrows for 117 million pounds ($177.3 million) marks a "significant strategic move" for Paragon (LSE: 0NFG.L - news) , Jefferies analysts said in a note, taking the firm into a new asset class and boosting earnings and return on equity.

"We view this as a positive development. It (Other OTC: ITGL - news) moves Paragon Bank into a profitable position and gives it a platform for growth in a large complementary product area," added the analysts, who have a 'buy' recommendation on Paragon's stock and a 540 pence price target.

Shares in Paragon, which owns Paragon Bank, were up 8.9 percent at 430 pence at 0906 GMT - the leading gainers on the FTSE Mid-Cap index and on course to post their biggest daily gain in four years.

Five Arrows Leasing provides asset finance services for industries including printing, construction and engineering. For the year to end-March, it generated net banking income of 28.5 million pounds and at end-March had net assets of 42.9 million pounds, Rothschild said in a statement.

Rothschild said the sale was in line with its plan to focus on financial advisory, wealth and asset management and merchant banking, and that the Five Arrows brand was not included in the deal, which is expected to close in November.

($1 = 0.6598 pounds) (Reporting by Simon Jessop; Editing by Pravin Char)