J.C. Flowers, Värde-led investor group agrees to sell Fairstone Financial Holdings

The investor group acquired CitiFinancial Canada from Citi in 2017 and rebranded the company as Fairstone.

An investment group led by J.C. Flowers & Co. and Värde Partners agreed to sell Fairstone Financial Holdings to Duo Bank of Canada. The bank is being supported in the transaction by Stephen Smith, Centerbridge Partners and Ontario Teachers’ Pension Plan. The deal is expected to close in the second quarter of 2020. The investor group acquired CitiFinancial Canada from Citi in 2017 and rebranded the company as Fairstone.

Press Release

An investor group led by J.C. Flowers & Co. LLC, a leading private investment firm specializing in the financial services industry, and Värde Partners, Inc., a leading global alternative investment firm, today announced that they have reached a definitive agreement to sell Fairstone Financial Holdings Inc. (“Fairstone” or “the Company”) to Duo Bank of Canada, a Toronto-based financial services provider supported by Stephen Smith, Centerbridge Partners L.P. and Ontario Teachers’ Pension Plan. Terms of the transaction, which is expected to close in the second quarter of 2020, were not disclosed.

Värde Partners and J.C. Flowers acted as equal partners in the transaction. The investor group acquired CitiFinancial Canada from Citi in 2017 and rebranded the Company as Fairstone with the goal of supporting its growth and market-leading position in the consumer finance space. Under the ownership of J.C. Flowers and Värde, Fairstone has grown into Canada’s leading non-bank provider of responsible credit solutions for near-prime borrowers.

Today, Fairstone has over C$3 billion in assets on a consolidated basis and a network of 239 branches with approximately 1,400 employees nationwide. The Company has diversified its capital structure and taken steps to reduce its funding costs as a standalone entity, including issuing the first consumer loan ABS transaction in the Canadian market. During J.C. Flowers’ and Värde’s ownership, Fairstone made significant investments to establish a best-in-class enterprise technology platform, enhanced its data-driven custom credit scoring models, developed a customer-centric approach to client service, and diversified its product and geography mix to reach a broader customer base.

“The transformation Fairstone has undergone in only three years has been remarkable, and we’re pleased to have helped create the leading non-bank lender in Canada,” said Thomas Harding, Managing Director at J.C. Flowers. “Fairstone represents the type of investment J.C. Flowers specializes in, taking a complex financial company and repositioning it for future growth.”

“We are proud of the work done to build Fairstone into Canada’s leading non-bank lender. We partnered with the team to create a fully standalone operating and financing model with new technology and digital capabilities deployed,” said Aneek Mamik, Senior Managing Director and Head of North America & Asia Financial Services at Värde Partners. “Värde’s more than 20 years’ experience investing in the sector enabled us to help the Fairstone team take the business to the next level.”

“It’s been a pleasure partnering with J.C. Flowers and Värde Partners and working together to create the Fairstone brand, develop robust digital marketing channels, expand omnichannel lending capabilities, transform our technology platforms and build an efficient capital structure. Together, we succeeded in growing Fairstone’s portfolio, revenues and earnings. I look forward to the next stage in our growth plan,” added Scott Wood, President and Chief Executive Officer of Fairstone.

Citi and National Bank Financial Inc. acted as lead financial advisors to J.C. Flowers and Värde, and Barclays also served as a financial advisor. Stikeman Elliott was legal counsel to J.C. Flowers and Värde.

About Fairstone Financial Holdings Inc.

Fairstone is Canada’s leading non-bank provider of responsible lending solutions for near-prime borrowers with over C$3 billion in assets on a consolidated basis. Fairstone, including through its predecessors, has close to a 100-year history of providing Canadians with access to responsible credit. The Company has two key business lines: lending directly to consumers through its branch network and online; and financing consumer retail and car purchases through retailers and dealerships. Headquartered in Montreal, Fairstone is privately-held by an investor group led by funds managed by affiliates of J.C. Flowers & Co. LLC and Värde Partners, Inc. More at Fairstone.ca.

About Värde Partners, Inc.

Värde Partners is a leading global alternative investment firm with roots in credit and distressed. Founded in 1993, the firm has invested more than $68 billion since inception and manages over $14 billion on behalf of a global investor base. The firm’s investments span corporate and traded credit, real estate and mortgages, private equity and direct lending. Värde employs more than 300 professionals across 13 offices worldwide. For more information, please visit www.varde.com.

About J.C. Flowers & Co. LLC

J.C. Flowers is a leading private investment firm dedicated to investing globally in the financial services industry. Founded in 1998, the firm has invested more than $16 billion of capital, including co-investment, in 56 portfolio companies in 18 countries across a range of industry subsectors including banking, insurance and reinsurance, securities firms, specialty finance, and services and asset management. With approximately $6 billion of assets under management, J.C. Flowers has offices in New York and London. For more information, please visit www.jcfco.com.