American Express Co. is acquiring the teams and technology behind the online lender Kabbage Inc. as the credit card giant seeks to provide more loans and other services to small-business owners.
Details of the acquisition talks emerged last week, and Amex said Monday in a statement that the deal won’t include Kabbage’s pre-existing loan portfolio. Those loans, including ones tied to the federal government’s Paycheck Protection Program, will be managed and retained by a dedicated entity when the deal is completed, Amex said. It didn’t disclose other terms of the transaction.
Amex has been encouraging its credit card customers to borrow more on its products, and is now bringing that strategy to its small-business unit. Already the largest credit card issuer in that sector, Amex will use the deal to offer more cash-flow management tools and working-capital products to mom and pop operations.
“The current crisis has been hard on small businesses — in many ways they’re at the epicenter of this Covid crisis,” Anna Marrs, president of global commercial services at Amex, said in an interview. “We believe that, over the long term, providing small businesses what they need to help them manage their cash flow and payments will continue to be an important growth area.”
Small businesses have been hit hard by the coronavirus pandemic, which has prompted widespread shutdowns across the country. Even before the crisis, the Federal Reserve classified just 35% of U.S. small businesses as “healthy” — meaning they are profitable, have higher credit scores and use retained business earnings to fund their operations.
SoftBank, Reverence
Bloomberg reported last week that Amex was seeking to acquire Kabbage in an all-cash deal that would value the lender at as much as $850 million, according to a person familiar with the matter. Kabbage, which is backed by investors including SoftBank Group Corp.’s Vision Fund and Reverence Capital Partners, was most recently valued at more than $1 billion after SoftBank plowed $250 million into the lender in 2017.
Kabbage CEO Rob Frohwein said Amex’s “card dominance provides a phenomenal base” to build strong customer relationships. “So we sort of feed off each other in a way that’s helping small businesses focus on their business and allowing us to help them with all things financial,” he said in an interview.
