LISA STEEN PROCTOR
Transamerica Corp. announced last week that it plans to sell substantially all of its consumer finance business, Transamerica Financial Services, which is headquartered in downtown Los Angeles.
The assets being put up for sale include a portfolio of approximately $3.6 billion of gross receivables (primarily real estate-secured loans), along with a network of about 420 branch offices in 44 states.
The consumer finance unit employs a total of 2,300 workers nationwide, more than 200 of whom work at its downtown L.A. headquarters and up to 100 more at branches in Southern California, said Richard Olsen, a spokesman for Transamerica.
Transamerica Corp. will also separately sell about $550 million in real estate-secured loans, non-real estate-secured loans and foreclosed properties. These assets were separated out because they are of lesser quality than the loans to be sold with the Transamerica Financial Services unit.
Transamerica which retained Goldman, Sachs & Co. to assist in the transaction hopes to complete the sale by the end of the second quarter of 1997. The assets up for sale represent 95 percent of Transamerica Corp.’s consumer loan portfolio.
“The consumer finance entity started to suffer an erosion in profitability in the early to mid-’90s,” said Olsen. “We are trying to focus on how to best improve results.”
Olsen said an “ideal candidate” for the purchase of the operations would be a “consolidator” a company already in the business of consumer loans that wants to add to its portfolio.
Transamerica has no intention of leaving the consumer finance business altogether. In fact, it plans to use a portion of the sale proceeds to expand its new, fledgling consumer finance unit.
“We are getting out of our historic business and selling it as an ongoing business because we plan to operate our consumer lending business in an entirely different way,” said Olsen.
Transamerica’s new consumer finance unit, unlike the branch-network unit being sold, is a highly centralized operation with only two locations. The Los Angeles location will handle marketing, and a Kansas City operation will handle collections.
“This may provide an increased opportunity in L.A.,” said Olsen.
Olsen said he doesn’t believe Transamerica Financial Services workers will lose their jobs. “A certain number are already working on the centralized business model, and there’s a good chance that some or all of the employees working on the old model (Transamerica Financial Services) could go with the new acquirer.”