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MBNA poised to buy Premium Credit
Sunday Telegraph (London, England)
Grant RingshawJanuary 4, 2004
MBNA, the US credit card giant, is the leading bidder to buy Premium Credit, a specialist finance business, for around pounds 200m.
Premium Credit was put up for sale in September by Electra Partners Europe, the private equity firm. Electra had originally looked at floating Premium Credit on the London Stock Exchange, but the plan was shelved after a series of approaches by trade and private equity buyers.
MBNA launched in the UK in the late 1990s and has made a series of credit card acquisitions. However, the acquisition of Premium Credit would be its first attempt to diversify into specialist finance.
Premium Credit provides loan facilities that allow individuals and companies to spread payments for insurance and other financial products.
The company's clients are mainly intermediaries such as insurance brokers who provide facilities for their customers to pay by instalments.
Although Premium Credit's biggest market is in insurance, the group has expanded into instalment plans for school fees and even sports and leisure club membership. In 2002, the finance business made a pounds 15m profit.
The company, which is thought to have around 40 per cent of the UK premium finance market, was sold by HSBC to a management buyout team backed by Electra for pounds 223m in 1996. The equity component of the deal was around pounds 51m.
MBNA has aggressively expanded its UK credit card business and is now thought to have a market share of around 14 per cent.
In March 2001 it bought the credit card business of Abbey National, the mortgage bank, for pounds 289m. The following year, MBNA paid pounds 225m to buy Alliance & Leicester's credit card operations.
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