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Tool and equipment manufacturer Snap-On Inc., Kenosha, WI, has terminated its joint venture Snap-On Credit LLC, which provides financial services to Snap-On's U.S. franchisees and customers. The joint venture was established in 1999 with CIT; CIT is the exclusive purchaser of financing contracts originated by Snap-On Credit.
As a consequence of the joint-venture termination, Snap-on will acquire CIT's interest in the joint venture for $8.2 million, Snap-on Credit will become a wholly owned subsidiary of Snap-on Inc., and Snap-on Credit will continue to service the existing portfolio of contracts owned by CIT.
Snap-on and CIT had been in discussions concerning a longer-term new joint venture agreement. Both parties have agreed to continue these discussions. To the extent a mutually acceptable agreement can be reached, including CIT resolving its liquidity issues over a longer term, Snap-On reports that it is possible the parties could, at a later date, enter into a new joint venture agreement.
Snap-On reports that Snap-On Credit operations are expected to be uninterrupted by this move. "All activities surrounding the financing of extended credit contracts to customers, leases of shop equipment and loans to franchisees will continue without charge," it reported.
Snap-On says it will provide financing for new contract originations.
The outstanding balance of this portfolio is $834 million. Snap-on has no obligation to purchase the existing portfolio of contracts owned by CIT.
Founded in 1920, Snap-on has annual sales of $2.9 billion.