By Mark Kleinman, City Editor
Britain's biggest debt recovery specialist is being courted about a merger that would create a financial services powerhouse, I have learned.
Arrow Global, which is majority-owned by a fund managed by the taxpayer-backed Royal Bank of Scotland (RBS) and has £7bn under management, is in talks to be bought by TDR Capital, the private equity firm which owns Lowell Group, another major debt collector.
Discussions between the two sides have been taking place for several months as part of an auction process initiated by the RBS Special Opportunities Fund. Goldman Sachs has been appointed by RBS to oversee the sale process for Arrow, which has 3.8m customer accounts.
If TDR does trump rival bidders for Arrow Global, it plans to merge it with Lowell, creating a company with £13bn under management, according to people close to the process. TDR acquired Lowell last year from Exponent Private Equity, another buyout firm.
Among the other bidders vying to buy Arrow is JRJ Group, a financial services-focused private equity firm which owns assets in areas such as commodities broking. JRJ was founded by a group of heavyweight executives including Jeremy Isaacs, the former head of Europe, Asia and the Middle East at Lehman Brothers.
A decision is expected to be made about the winning bidder for Arrow Global before the end of the year.
The RBS Special Opportunities Fund is a private equity vehicle managed by the bank but in which it has only a minority stake. People close to RBS said that a sale of Arrow Global was likely to be "reputationally helpful" given the controversy that stalks debt collection businesses.
Manchester-based Arrow Group, which recently negotiated a new £110m debt facility, claims to be "committed to facilitating positive outcomes, and strongly believes that what is good for the customer is also good for business". The company is run by Tom Drury, the former chief executive of Shanks, the waste management group.
Its chairman is Sir George Mathewson, the former chief executive and chairman of RBS, who has been a prominent figure in the debate about the reshaping of Britain's banks.
Arrow Global's asset portfolio consists of consumer and commercial credit including credit card, personal loan, retail, motor, mortgage, telecommunication and utility receivables. More than 80 per cent of Arrow Global's assets are in the UK with the remainder in continental Europe.
RBS, TDR. JRJ and Arrow Global all declined to comment.
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