Fort Worth-based FirstCash Inc., which operates more than 2,800 retail pawn stores across the U.S. and Latin America, has entered into a definitive agreement to acquire American First Finance Inc. to launch into the buy now pay later space.

American First Finance (AFF) is a technology-driven virtual lease-to-own and retail finance provider. The fintech focuses on underserved retail customers in the U.S., and says it’s the fourth largest provider of point-of-sale payment solutions to that market.

FirstCash also has a history of being a leading provider of financial services to underserved consumers, primarily those who are cash and credit constrained. The retailer has grown to employ 16,000 and operate thousands of pawn locations that buy and sell a variety of jewelry, electronics, tools, appliances, sporting goods, musical instruments and other more.

The deal with AFF is a new era: Becoming a leader in the point-of-sale (POS) payments space.

Its a highly complementary market, according to FirstCash, as it focuses on similar customers. FirstCash will now be able to step into a $600 billion total addressable market that quantifies the rapidly growing POS and buy now pay later payment space.

“Since our founding more than 30 years ago and through the merger of First Cash and Cash America in 2016, we have successfully executed on our growth strategy and established FirstCash as a leading retailer and provider of financial services to underserved consumers, while delivering significant value to shareholders,” Rick Wessel, FirstCash CEO and Vice-Chairman of the Board, said in a statement.

“This transaction diversifies us beyond our core pawn business with the addition of a fast-growing segment that significantly expands our customer base and introduces a scalable, technology-driven product set into our organization.”

AFF brings the tech

AFF has a network of more than 6,500 active merchant partner stores and e-commerce platforms—mainly those in furniture and mattresses, appliances, jewelry, electronics, and automotive products and repair services—across the country. It focuses on consumers who traditionally wouldn’t qualify for financing offers at these locations, offering payment flexibility across marketplaces.

AFF touts a technology platform that integrated into a merchant partner’s systems, along with data and e-commerce capabilities. According to the company, in 2021 and 2022, it estimates $600 million and $800 million in revenues, respectively. That’s a large leap from the approximately $350 million in 2020.

“When I founded AFF in 2013, I set out to provide millions of consumers without pristine credit with flexible payment solutions to acquire durable goods and services, and I am incredibly proud of what we’ve built,” Doug Rippel, AFF chairman and founder, said in a statement. “FirstCash shares our vision of providing retail financing alternatives to underserved customers, and with its strong operational track record, we are confident that AFF will be even better positioned to grow its customer and merchant base and continue supporting their needs.

Rippel will be joining the FirstCash Board of Directors with the deal.

Going digital

FirstCash plans to use AFF to integrate digital payment options for its pawn customers, a move that the company says will offer greater convenience and operational efficiencies.

These flexible payment options will also provide a new source of revenue, as AFF’s LTO platform will allow customers to take home leased merchandise immediately, rather than just use FirstCash’s existing layaway program.

According to Wessel, FirstCash will be well positioned to drive further growth into the POS and buy now pay later space. He believes using the platform in pawn stores will drive faster inventory turns and supplement the company’s existing retail layaway product.

“With the tremendous growth in the retail POS finance and buy now pay later space, AFF is an ideal partner for FirstCash, bringing a highly profitable and scaled platform with industry leading LTO and retail finance capabilities, a large and highly reputable merchant base and an experienced management team,” he said. “We are excited to welcome AFF’s talented team and look forward to the opportunities ahead to serve more customers than ever.”

The agreement is valued at around $1.17 billion, based on FirstCash’s closing stock price on Oct. 26, which consists of around 8.05 million shares of common stock and $406 million in cash subject to a net debt adjustment, per a news release.

An additional $300 million of consideration is payable if AFF reaches certain performance targets through the first half of 2023.

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