Financial Sector Review: Advance America Agreement, Mortgage Bonds are Back

Advance America (NYSE:AEA) Cash Advance Centers, and Grupo Elektra, S.A.B. de C.V. announced that Advance America and subsidiaries of Grupo Elektra have entered into a definitive agreement under which Grupo Elektra will acquire control of all of the outstanding shares of Advance America, a leading U.S. short-term lender, for $10.50 per share in cash, representing a 32.7% premium to the company’s closing price of $7.91 on Feb. 15 . The total transaction value is approximately $780M, including the Company’s outstanding debt as of Dec. 31, 2011.

The acquisition of Advance America represents Grupo Elektra’s first major investment in the U.S. financial services market. Advance America’s Board of Directors unanimously approved the transaction and recommends that its stockholders vote in favor of the transaction. Under the terms of the merger agreement, Advance America may solicit acquisition proposals from third parties for a period of 45 days and subject to the terms of the agreement, may, at any time, respond to an unsolicited proposal that its Board of Directors determines would be reasonably likely to result in a superior proposal. The Board of Directors of Advance America, with the assistance of its advisors, will actively solicit acquisition proposals during this 45-day period. There can be no assurance that this process will result in a superior proposal. If there is not a superior proposal, the transaction is expected to close during 1H of 2012.

The shares closed at $10.44, up $2.53, or 31.98%, on the day. Its market capitalization is $651.83 million.

State Auto Financial (NASDAQ:STFC): Reports revenue $401.1M vs. consensus $386.65M

The shares closed at $15.50, up $3.25, or 26.53%, on the day. Its market capitalization is $624.25 million.

The Phoenix Companies (NYSE:PNX): Reports Q4 revenue $450.4M vs. consensus $257.23M. Revenue may not be comparable to consensus.

The shares closed at $2.35, down $0.16, or 6.37%, on the day. Its market capitalization is $273.30 million.

Bank of America Corp (NYSE:BAC): The proposed $8.5B settlement of some of Bank of America Corp.’s (NYSE:BAC) mortgage-backed securities liability could be in the courts for years, according to Chief Judge Dennis Jacobs, a top appeals court judge. The 2nd U.S. Court of Appeals in New York is considering if last year’s Bank of America accord is a matter for federal court review or belongs in state court where it was first filed.

The shares closed at $8.09, up $0.31, or 3.98%, on the day. Its market capitalization is $85.24 billion.

Citigroup Inc. (NYSE:C): Moody’s Japan K.K. has placed under review for possible downgrade the ratings of Citibank Japan Ltd. Those affected are its C- bank financial strength rating, which translates into a Baa1 baseline credit assessment, and its A2/Prime-1 long-term and short-term deposit ratings. At the same time, Moody’s has placed under review for possible downgrade the Baa1 issuer rating of Citigroup Japan Holdings Corp.; and the Baa1 senior unsecured and long-term issuer ratings, and Baa2 subordinated debt ratings, and Prime-2 short-term rating of Citigroup Global Markets Japan Inc.

The shares closed at $32.71, up $0.99, or 3.12%, on the day. Its market capitalization is $95.64 billion.

JPMorgan Chase & Co. (NYSE:JPM) will reportedly cut some jobs today in London, DealBreaker reports.

The shares closed at $38.00, up $0.6, or 1.6%, on the day. Its market capitalization is $143.36 billion.

Wells Fargo & Company (NYSE:WFC): In an effort to better serve its expanding customer base, Wells Fargo Insurance announced a new regional structure for its insurance brokerage and consulting division. Previously operating with 15 regional offices, the business is now based upon seven regions, with approximately 160 local offices. Serving the insurance needs of business banking, middle market, large corporate and high net worth clients, the group is led by Kevin Kenny, executive vice president with Wells Fargo Insurance.

The shares closed at $30.37, up $0.2, or 0.66%, on the day. Its market capitalization is $159.83 billion.

Goldman Sachs Group, Inc. (NYSE:GS): There is renewed interest among investors in once-toxic mortgage bonds that were at the center of the financial crisis, reports the Wall Street Journal. Prices of some distressed bonds backed by subprime home loans, the ones issued before the crisis to borrowers with questionable credit histories, have returned double-digit percentage gains this year.

The shares closed at $114.74, up $1.57, or 1.39%, on the day. Its market capitalization is $56.49 billion.

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