In an effort to expand its business and add channel financing capabilities, Wells Fargo & Co. (WFC) is set to acquire its strategic partner, Castle Pines Capital. Yesterday, the company announced that in order to carry out the acquisition process, Wells Fargo Bank NA has entered into a definitive agreement to take over the remaining equity interest in CP Equity LLC, the lone owner of Castle Pines Capital LLC and its affiliates.
Wells Fargo expects to close this deal by the summer of this year. Terms of the deal were not disclosed. Castle Pines Capital’s financial advisor was Morgan Stanley (MS) while its legal advisor was Bryan Cave LLP.
Privately held Castle Pines Capital offers channel financing solutions to resellers in the technology sector worldwide. It became a client of Wells Fargo Capital Finance’s Lender Finance segment in 2005. Later in 2007, Wells Fargo advanced its strategic tie ups with the company by acquiring a minority equity investment in Castle Pines Capital.
Strategic acquisitions have been part of Wells Fargo’s endeavor to strengthen its business model, expand its capabilities and diversify its footprint. Its growth plans have historically included a several acquisitions, Wachovia being the largest addition in December 2008. The company has demonstrated its ability to assimilate local franchises, offering a wider range of products than the acquired company could have had, thus increasing the number of options for customers to choose from. This has been the driving force behind its growth in the recent years.
With its diverse geographic and business mix, Wells Fargo is better positioned than its peers. Opportunistic acquisition and the demise of some smaller players helped it the company to garner a larger share in the market. Yet, top-line headwinds and regulatory issues remain our concerns.
Wells Fargo currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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