December 19, 2008 / 1:47 PM / 11 years ago

UPDATE 2-Solera acquires HPI from Aviva for $117.4 mln

(Recasts; adds background, analyst’s comments, share movement)

By Antonita Madonna Devotta

BANGALORE, Dec 19 (Reuters) - Solera Holdings Inc SLH.N, a provider of software and services to the auto insurance industry, said it bought used-vehicle validation-services provider HPI Ltd from British insurer Aviva Plc (AV.L) for $117.4 million.

Shares of Solera rose more than 13 percent on the news to touch a high of $22.71 in Friday trade, while Aviva shares dropped 5 percent to 377.25P on the London Stock Exchange.

Solera expects the acquisition to add about 7 cents a share to adjusted net income and about $21 million in revenue to its 2009 financial year, but said it would not update its outlook.

“The acquisition will help us meet some of the increased demand from our clients for access to integrated historical information on specific vehicles and specific clients with which they are about to transact,” Solera Chief Executive Tony Aquila said in a statement.

“It is very positive because it gives them a product for the vehicle validation market, that can be used by insurance companies, finance companies, banks and auto dealers,” analyst Gary Prestopino of Barrington Research told Reuters.

The analyst also said Solera’s recent public offering was for the purpose of making acquisitions.

Last month, Solera offered 4.5 million shares, priced at $20 each, but did not disclose the reason for which it was raising the capital.

On Nov. 19, the company said it acquired Inpart Servicos Ltda, an electronic exchange for the purchase and sale of vehicle replacement parts in Brazil.

DEAL DYNAMICS

The total deal value consisted of about $100.5 million in cash and a subordinated note of about $16.9 million that carries an annual interest rate of 8 percent and is due and payable on Dec. 31, 2011.

Solera said Aviva could earn up to an additional $7.2 million in cash if HPI achieves certain post-closing financial performance measures in 2009, 2010 and 2011.

After the acquisition, Solera said it was left with $150 million of cash on its balance sheet and no amounts outstanding under a senior secured revolving credit facility.

Shares of Solera were trading up $2.44 at $22.41, Friday midday on the New York Stock Exchange. (Reporting by Antonita Madonna Devotta in Bangalore; Editing by Pratish Narayanan, Dinesh Nair)

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