Virginia Beach-based Liberty Tax to be sold for $243 million offering consumer credit through LoanMe
The company that owns Liberty Tax is selling it for at least $243 million to a recent Canadian buyer who plans to combine tax preparations with loans. That company, NextPoint Acquisition Corp., is also buying LoanMe, a California-based lender known for making high-yield loans and having a history of regulatory troubles.
Franchise Group Inc., which took control of Virginia Beach-based Liberty Tax in 2018 after the company’s founder and former CEO was fired and forced to sell his controlling interest, announced the sale Monday. The deal includes the sale of Liberty Tax for $182 million in cash and at least 61,000 voting shares of NextPoint.
Franchise Group CEO Brian Kahn said in a statement that the company intends to use the $182 million in cash to pay down debt. The statement also said that Liberty Tax reported $123 million in revenue for fiscal 2020, although it has not yet filed a full report for its fiscal year with the Securities and Exchange Commission.
Brent Turner, CEO of Liberty Tax, is expected to become CEO of a new combined company, NextPoint Financial. In a conference call Monday, he said he expects loans to make up about 36% of the company’s business going forward and tax preparation to make up less than 30%. LoanMe offers consumer loans ranging from $1,000 to $20,000 and small business loans up to $100,000, he said.
Turner said LoanMe products are expected to be available at approximately 850 physical Liberty Tax locations by 2023.
Liberty Tax has 1.6 million customers and about 2,700 locations, he said.
Liberty Tax franchisees must continue to maintain their existing franchise agreements and provide tax preparation services after the sale is complete, but an attorney representing Liberty Tax said they will not be forced to become lenders if they don’t want to.
“NextPoint Financial is going to be a very profitable business,” Turner said during the earnings call.
The new company will target “Main Street” customers, including low-income taxpayers and small and medium-sized businesses, he said.
NextPoint chairman Andy Neuberger also said the company would target “credit-impaired consumers and small businesses” who are struggling to access traditional credit.
Neuberger, the founder and former CEO of BasePoint Capital LLC, said during Monday’s call that LoanMe has originated more than $2 billion in loans since 2014.
According to a slide used during Monday’s conference call, executives intend to offer new products including lines of credit, mobile banking, auto financing and debt resolution.
Since taking control of Liberty Tax in 2018, the company’s new leadership, managers of investment firms, changed its name to Franchise Group and began focusing on buying other franchise-related businesses, including Buddy’s Home Furnishings and The Vitamin Shoppe .
Under the ownership of the Franchise Group, Liberty Tax’s presence in Virginia Beach has diminished and staff moved from a sprawling Virginia Beach headquarters to a smaller office across from the Virginia Beach Courthouse last year. The legacy offices, a 29,804 square foot area at 1716 Corporate Landing Parkway and an adjacent 31,172 square foot area at 1732 Corporate Landing Parkway, will be offered for sale Loopnet.com for $3.8 million and $4.5 million, respectively.
NextPoint Acquisition Corp. was formed in mid-June with the aim of acquiring companies in the alternative lending and financial services sectors. The sale is expected to close in the second quarter of this year and is subject to NextPoint also completing the purchase of LoanMe, an online seller of consumer credit based in Anaheim, California.
In 2018, the California Department of Business Oversight issued a cease-and-desist order on LoanMe for paying unlicensed individuals to apply for loans on its behalf from at least 2013 to 2015.
LoanMe, known in the past for offering loans with interest rates in excess of 100%, has been linked with another lender, CashCall. The LoanMe name appears to have started in 2014 when it was changed from Cash4Rent Inc. (soon to be MortgageCall Inc.), according to filings from the California Secretary of State. A 2012 filing shows that the President of Cash4Rent was J. Paul Reddam, who founded CashCall. The Los Angeles Times wrote that in 2018, Reddam reportedly sold Cash4Rent to “three close associates” in 2014 and LoanMe continued to lend money and provide services.
CashCall was sued by the Consumer Financial Protection Bureau in 2013 for collecting money that borrowers no longer owed. The federal agency won a $10 million judgment that has since been appealed. Virginia Attorney General Mark Herring settled with the company for $15.3 million in early 2017 for deceiving borrowers and charging up to 230% interest on its online loans.
LoanMe’s website says the company “changed ownership” in April 2019, but it wasn’t immediately clear who owns it now. When asked who owns LoanMe, Marc Charbin, who is listed as the contact for information regarding a press release from NextPoint, said the company chose not to disclose it.
Jonathan Williams, who also attended Monday’s conference call announcing the sale of NextPoint, has been listed as President of LoanMe since at least May 2014. Williams is expected to become president of NextPoint Financial’s lending business.