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Navient Closes Earnest Acquisition to Enforce Digitization

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Navient Corporation (NAVI - Free Report) , headquartered at Wilmington, completed the cash-acquisition deal with San Francisco-based Earnest, a financial technology company, under which the former acquired the latter. In this era of digitization, the combined entity will serve consumer-centric education credit products. Notably, this deal was announced in early October for a total value of $155 million.

On completion, Navient has taken over education refinancing loans over $500 million. Earnest is a financial technology and education-finance company serving consumers unable to get finance from traditional banks. Initiated in 2013, the company is likely to serve with loans worth $1 billion in student loan refinancing loans in 2017.

Terms of the Deal

Per the deal, the remaining share-repurchase program of Navient will be suspended till the end of 2018, though the annual dividend of 64 cents remains in place. Notably, the capital will be invested toward growth of the education-lending business and building book value.

Notably, the brand — Earnest — would continue as before, headed by its current management team. In addition, its clients will be served with the same rates, terms and benefits they are entitled to.

Bottom Line

We believe the latest acquisition is a befitting one that will likely support Navient’s future prospects, which faces potential threat from lack of access to new loans and alternative sources of revenues. The company’s focus on tapping growth opportunities is anticipated to boost its overall business performance. Further, a gradually improving economy and declining unemployment rate are anticipated to provide support to the company.

Notably, the company's share price lost nearly 17.1% over the last six months, as compared with 14.8% growth recorded by the industry.



Currently, Navient carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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