UPDATE 1.20pm: Cash Converters says it has entered into a joint venture with major shareholder, US-based EZCORP, to launch new stores in Mexico and South America.
Cash Converters will hold a 20 per cent interest in the joint venture through a subsidiary company in return for granting a master licence to the joint venture for Latin America and providing information technology services, training and management support.
EZCORP, through a subsidiary company, will inject $US3.6 million into the joint venture in return for its 80 per cent interest.
Any additional funding is subject to mutual agreement with arrangements in place to allow EZCORP to provide extra funding and receive a preferential distribution without diluting Cash Converters' 20 per cent interest in the joint venture.
EZCORP owns and operates 244 pawn stores in Mexico, trading as Empeno Facil, and has operational headquarters in Miami, Florida.
However Cash Converters said EZCORP considered Cash Converters' business model as unique in Mexico and Latin America.
The joint venture would grant a master franchisor agreement to suitable local partners for the development and roll out of Cash Converters stores, both by way of owner-operated stores and franchised stores across Mexico and Latin America.
Cash Converters said the joint venture planned to open its first Cash Converters store in Mexico later this year.
Managing director Peter Cumins described the deal as an exciting opportunity to achieve progress in South America with minimal capital outlay and with the support of EZCORP, which had an established presence in Mexico.
"We see significant opportunity for the provision of our financial services products and online platforms across the region," he said.
"Although the joint venture is not expected to be a material contributor in the short term, we see strong growth potential for us in the region over the next five to 10 years."
In 2011, EZCORP walked away from a joint venture deal with Cash Converters which would have seen it inject $70 million into the business. The company had been spooked by new legislative restrictions on short term lenders in Australia.
Shares in Cash Converters closed up two cents, or 2.21 per cent, at 92.5 cents.