Household to Buy ACC, Double Auto Lending

Financial services provider Household International Inc. on Monday agreed to buy San Diego-based ACC Consumer Finance Corp. for about $200 million in stock and cash to more than double the size of its automobile finance business.

ACC, which specializes in loans to car buyers who have trouble obtaining prime financing, manages a portfolio of more than $400 million in loans, offering services to auto dealers in California and 33 other states.

“Household was doing a little in the sub-prime auto-lending business, and they felt that building it up internally was too risky and too slow,” said Mark Alpert, an analyst at Alex. Brown & Sons Inc. Household’s sub-prime auto loans total about $200 million, he said.

Holders of ACC shares will receive between $2 and $4 in cash for each share in addition to common stock of Household, which offers credit card and consumer finance services in Canada, Britain and the U.S.

Household’s offer amounts to about $23.58 a share, or a 50% premium over Friday’s closing price of $15.75. The price is also 16 times the company’s expected 1998 earnings, according to an IBES International Inc. survey of four analysts.

On Monday, ACC shares surged $5.38 to close at $21.13 in Nasdaq trading.

The transaction, expected to close by the end of the year, comes as rising personal bankruptcies take a toll on sub-prime auto and other consumer lenders.

ACC will become part of Household’s HFC Auto Credit Corp., and ACC’s chief executive and chairman, Rocco Fabiano, will be president of the San Diego-based unit. Coming under the umbrella of a large lender will help ACC meet challenges from rivals such as AmeriCredit Corp., he said.

“A partnership with an organization like Household gives us a chance to really compete with anybody head-to-head,” Fabiano said.

Shares of Prospect Heights, Ill.-based Household sank $1.31 to close at $115 on the New York Stock Exchange.