SOUTHFIELD, Mich. — Explained as a pathway to generate capital to shareholders, Credit Acceptance Corp. recently announced the company commenced a tender offer to purchase up to 1,904,761 shares of its outstanding common stock. Credit Acceptance set the price at $65.625 per share.

Executives anticipate they will obtain all of the funds necessary to purchase shares tendered in the tender offer and to pay related fees and expenses. Credit Acceptance is looking to accomplish these goals through a combination of the proceeds of a new debt financing and by borrowing under its $170 million revolving secured line of credit facility.

The company emphasized the tender offer is subject to the consummation of the debt financing on terms satisfactory to management.

Credit Acceptance asserted the primary purpose of this proposed transaction is to distribute excess capital to shareholders. The company believes distributing capital to shareholders is appropriate at this time for the following reasons:

—Since the beginning of 2009, Credit Acceptance has generated approximately $315 million in profits.

—In 2010, the company completed several longer-term debt financing which have significantly reduced the probability that it would need to curtail its loan originations if debt markets become inaccessible. 

—As of Dec. 31, Credit Acceptance had approximately $340 million in unused and available capacity on our revolving lines of credit. Upon completion of the tender offer and the related debt financing, the company thinks will have sufficient capital to fund new loan originations.

Since 1999, the company pointed out it has distributed $599.2 million to shareholders through share repurchases.

"While we could distribute excess capital to shareholders through dividends, share repurchases provide shareholders with discretion to increase their ownership, receive cash or do both based on their individual circumstances and view of the value of a Credit Acceptance share," company executives explained. "A dividend does not provide this flexibility."

Credit Acceptance's chairman of the board and majority shareholder Donald Foss indicated his non-binding intention to tender 11.6 million shares. Furthermore, the trustee of certain grantor retained annuity trusts created by Foss also revealed his non-binding intention to tender 4.1 million shares.

To the extent all other shareholders tender, Credit Acceptance determined each shareholder will receive their pro rata portion of the amount distributed and their ownership stakes will remain unchanged.

To the extent all other shareholders do not tender, the company stated each shareholder tendering all their shares will receive a greater than pro rata share of the amount distributed, but will reduce their ownership stake.

Officials went on to note shareholders not tendering will not receive any cash, but will increase their ownership stake in the company.

Credit Acceptance indicated this tender offer will expire at 5 p.m. EST on March 10 unless the company opts to extend. Management explained tenders of shares must be made on or prior to the expiration of the tender offer and shares may be withdrawn at any time on or prior to the expiration of the tender offer.

"Our obligation to purchase shares in the tender offer is not conditioned upon any minimum number of shares being tendered," Credit Acceptance executives stressed.

"The tender offer is, however, subject to the conditions set forth in the offer to purchase and related letter of transmittal documents being sent to shareholders, including the consummation by us of the debt financing on terms satisfactory to us," they continued.

Under the tender offer, the company said shareholders of Credit Acceptance common stock will be invited to choose how many shares they are willing to sell at $65.625 per share.

If more than the maximum number of shares sought is tendered, the company indicated tendering shareholders owning fewer than 100 shares — or "odd lot" holders — will have their shares purchased without proration and all other tendered shares will be purchased on a pro rata basis, subject to the conditional tender provisions described in the offer to purchase.

Officials continued that shareholders whose shares are purchased in the tender offer will be paid the purchase price net in cash, without interest, promptly after the expiration of the tender offer.

And, the company noted shareholders whose shares are not purchased in the tender offer will have their shares returned, free of charge, promptly after the expiration of the tender offer.

"If Mr. Foss tenders 11.6 million shares and the trustee of certain grantor retained annuity trusts created by Mr. Foss tenders 4.1 million shares as they have indicated, the proration factor would be substantially impacted such that only a limited number of shares properly tendered by shareholders other than ‘odd lot' holders would be purchased and it is likely that no shares conditionally tendered would be purchased," company officials explained.

"Four of our other officers have advised us that they intend to tender shares in the offer and/or sell shares in the open market during the pendency of the offer," they added. "If the intention of Mr. Foss, the trustee of Mr. Foss' trusts or our other officers and directors changes materially, we will disclose the change in intention prior to the expiration of the offer."

As of Dec. 31, Credit Acceptance determined it had 27,303,946 shares outstanding. The reported sale price of Credit Acceptance's common stock on the Nasdaq Global Market on Feb. 8 — which was the last trading day prior to the announcing of the offer — was $62.82 per share.

Credit Acceptance noted Georgeson is the information agent for the offer and Computershare Trust Company, N.A. is the depositary. The company said the offer to purchase, letter of transmittal and related documents are being mailed to registered shareholders and will also be made available for distribution to beneficial owners of Credit Acceptance common stock.

Questions related to the offer and requests for copies of the offer to purchase, the letter of transmittal and related documents can be directed to Georgeson at (866) 296-6841.

"Neither Credit Acceptance nor its board of directors is making any recommendation to any shareholder as to whether to tender or refrain from tendering their shares," company officials emphasized.

"Shareholders should carefully evaluate all information in the offer to purchase and the related letter of transmittal, should consult with their own financial and tax advisors, and should make their own decisions about whether to tender shares, and, if so, how many shares to tender," they went on to say.

"This announcement is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any shares of Credit Acceptance's common stock," the company added. "The solicitation of offers to buy Credit Acceptance's common stock will only be made pursuant to the offer to purchase and related materials that Credit Acceptance will be distributing to its shareholders.

The company also told shareholders that they are urged to read Credit Acceptance's tender offer statement on Schedule TO filed with the Securities and Exchange Commission in connection with the tender offer, which includes as exhibits the offer to purchase and the related letter of transmittal, as well as any amendments or supplements to the statement when they become available, "because they contain important information."

Credit Acceptance pointed out each of these documents has been or will be filed with the SEC, and shareholders may obtain them free of charge from the SEC at the SEC's website at http://www.sec.gov or from Georgeson, the information agent for the tender offer, at (866) 296-6841.