First Cash Financial (FCFS) and Cash America (CSH) announced that they have entered into a definitive merger agreement under which the two companies will combine in a tax free, all-stock transaction.

The pro-forma market value of equity of the transaction is valued at approximately $2.4B, based on the current shares outstanding and the closing stock price on April 27, 2016 for both companies. The combined company, to be named FirstCash, will have one of the largest retail pawn store footprints in Latin America and the United States, with over 2,000 locations across four countries.

Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, Cash America shareholders will receive a fixed exchange ratio of 0.84 First Cash shares for each Cash America share they own. Following the close of the transaction, First Cash shareholders will own approximately 58% of the combined company, and Cash America shareholders will own approximately 42%.

Pending completion of the transaction, both companies expect to continue to pay quarterly cash dividends under each company's existing dividend policy and respective stock repurchase programs will be suspended. The transaction is expected to close in the second half of 2016, subject to the satisfaction of customary closing conditions, the expiration or termination of the applicable Hart-Scott-Rodino waiting period and approvals by the shareholders of both First Cash and Cash America.

The combined company is expected to pay an annual cash dividend of 76c per share. The transaction is expected to be significantly accretive to free cash flow and EPS. The increased scale is expected to result in $50M in annual run-rate synergies.