Paysafe is potentially the target of a 590p per share (all cash) bid from a private equity consortium. Paysafe’s largest shareholder supports the bid, which must formally be made by 18 August. At the same time, Paysafe has announced the all-cash acquisition of a US payment processor for $470m. This reduces the group’s exposure to the gambling sector and strengthens its position in North America.
Paysafe |
Both target and bidder |
Bid and acquisition |
Software & comp services |
25 July 2017 |
Share price performance
Business description
Next events
Analysts
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Paysafe is potentially the target of a 590p per share (all cash) bid from a private equity consortium. Paysafe’s largest shareholder supports the bid, which must formally be made by 18 August. At the same time, Paysafe has announced the all-cash acquisition of a US payment processor for $470m. This reduces the group’s exposure to the gambling sector and strengthens its position in North America.
Year end |
Revenue ($m) |
EBITDA* |
EPS* |
DPS |
P/E |
EV/EBITDA |
12/13 |
253.4 |
53.1 |
15.1 |
0.0 |
50.2 |
74.2 |
12/14 |
365.0 |
82.9 |
22.0 |
0.0 |
34.5 |
47.5 |
12/15 |
613.4 |
152.6 |
25.6 |
0.0 |
29.7 |
25.8 |
12/16 |
1,000.3 |
300.8 |
42.1 |
0.0 |
18.0 |
13.1 |
Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments
Potential bid at 590p per share
Since May, a consortium comprising CVC and Blackstone has made several proposals to buy Paysafe, which the board has rejected. With the consortium having raised the proposed bid price to 590p per share (all cash), Paysafe has now granted it due diligence access. The deal is conditional on the consortium selling the Asia Gateway to a third party; a buyer has already been found and key terms agreed. Proceeds from this sale will partially fund the acquisition. The consortium has until 18 August to make a formal offer. Paysafe’s largest shareholder, Old Mutual, is supportive of the bid.
Buying US payment processor for $470m
Paysafe is acquiring most of the assets of Delta Card Services Inc, the owner of Merchants’ Choice Payment Solutions (MCPS), a Texas-based payment processor, for $470m in cash. MCPS processes transactions worth more than $14bn pa for 60,000 merchants in 50 states. As well as online processing, MCPS offers point-of-sale (POS) processing, which will broaden Paysafe’s offering. The acquisition is being funded by $90m in cash and a $380m increase in the loan facility. Pro forma FY16 revenues were $329m and adj. EBITDA was $49m (15% margin). If fully owned for FY16, this would have reduced the contribution from online gambling from 46% to 35%, and the Asia Gateway contribution from 13% to 10% of group revenues. Paysafe expects to be able to achieve cost synergies of $7.5m.
Valuation: Reflects active payments M&A market
The potential offer of 590p is at a 9% premium to the closing price on 20 July but at a 34% premium to the volume weighted average price over the six months to 30 June, just prior to the start of sector M&A activity. Prior to the bid, the stock had gained 46% year to date.
For the purposes of the Takeover Code, Edison Investment Research is deemed to be connected with Paysafe. Paysafe is a research client of Edison Investment Research.
Exhibit 1: Financial summary
$'000s |
2013 |
2014 |
2015 |
2016 |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
253,367 |
364,954 |
613,392 |
1,000,282 |
Cost of Sales |
(121,484) |
(187,298) |
(316,922) |
(457,420) |
||
Gross Profit |
131,883 |
177,656 |
296,470 |
542,862 |
||
EBITDA |
|
|
53,106 |
82,946 |
152,620 |
300,825 |
Company EBITDA |
|
|
52,213 |
85,965 |
152,563 |
300,825 |
Operating Profit (before amort acq intang, SBP and except.) |
42,888 |
71,257 |
133,201 |
268,251 |
||
Amortisation of acquired intangibles |
(3,300) |
(9,200) |
(31,900) |
(51,900) |
||
Exceptionals |
(1,368) |
7,219 |
(60,986) |
(8,249) |
||
Share-based payments |
(4,512) |
(8,274) |
(14,089) |
(13,726) |
||
Operating Profit |
33,708 |
61,002 |
26,226 |
194,376 |
||
Net Interest |
(995) |
(2,024) |
(14,418) |
(26,383) |
||
Profit Before Tax (norm) |
|
|
41,893 |
69,233 |
118,783 |
241,868 |
Profit Before Tax (FRS 3) |
|
|
32,713 |
58,978 |
11,808 |
167,993 |
Tax |
(1,235) |
(1,303) |
(4,405) |
(25,972) |
||
Profit After Tax (norm) |
40,311 |
67,703 |
108,686 |
212,968 |
||
Profit After Tax (FRS3) |
31,478 |
57,675 |
7,403 |
142,021 |
||
Average Number of Shares Outstanding (m) |
252.2 |
277.7 |
399.8 |
483.6 |
||
EPS - normalised (c) |
|
|
15.1 |
22.0 |
25.6 |
42.1 |
EPS - FRS 3 (c) |
|
|
12.5 |
20.8 |
1.9 |
29.4 |
DPS (c) |
0.00 |
0.00 |
0.00 |
0.00 |
||
Gross Margin (%) |
52.1% |
48.7% |
48.3% |
54.3% |
||
EBITDA Margin (%) |
21.0% |
22.7% |
24.9% |
30.1% |
||
Company EBITDA Margin (%) |
20.6% |
23.6% |
24.9% |
30.1% |
||
Operating Margin (before am and except.) (%) |
16.9% |
19.5% |
21.7% |
26.8% |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
65,551 |
295,955 |
1,569,269 |
1,552,326 |
Intangible Assets |
53,231 |
284,723 |
1,548,253 |
1,518,445 |
||
Tangible Assets |
12,320 |
10,114 |
18,492 |
23,452 |
||
Other Fixed Assets |
0 |
1,118 |
2,524 |
10,429 |
||
Current Assets |
|
|
184,490 |
177,275 |
259,045 |
420,313 |
Cash & cash equivalents |
|
|
164,379 |
109,893 |
117,875 |
231,157 |
Restricted NETELLER cash |
|
|
6,198 |
8,777 |
29,070 |
31,854 |
Cash held as reserves & settlement assets |
|
|
0 |
38,607 |
66,341 |
100,459 |
Receivable from Members & Merchants |
|
|
0 |
0 |
0 |
0 |
Trade and other debtors |
|
|
13,913 |
19,998 |
45,759 |
56,843 |
Current Liabilities |
|
|
117,634 |
114,410 |
170,943 |
232,617 |
Creditors |
107,524 |
58,240 |
121,070 |
175,464 |
||
Payable to Members/Merchant liability |
0 |
30,591 |
16,758 |
18,547 |
||
Short term borrowings |
10,110 |
25,579 |
33,115 |
38,606 |
||
Long Term Liabilities |
|
|
801 |
150,498 |
582,804 |
521,788 |
Long term borrowings |
801 |
107,205 |
494,410 |
456,570 |
||
Other long term liabilities |
0 |
43,293 |
88,394 |
65,218 |
||
Net Assets |
|
|
131,606 |
208,322 |
1,074,567 |
1,218,234 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
94,542 |
42,699 |
91,711 |
278,487 |
Net Interest |
(158) |
(1,873) |
(8,403) |
(12,459) |
||
Tax |
(1,191) |
(1,564) |
(4,929) |
(10,186) |
||
Capex |
(13,567) |
(11,094) |
(23,721) |
(53,698) |
||
Acquisitions/disposals |
(5,281) |
(169,192) |
(1,102,070) |
(43,827) |
||
Financing |
1,188 |
(4,939) |
670,173 |
(13,482) |
||
Dividends |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
75,533 |
(145,963) |
(377,239) |
144,835 |
||
Opening net (debt)/cash |
|
|
85,829 |
118,389* |
(22,891) |
(409,650) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(1,697) |
4,683 |
(9,520) |
796 |
||
Closing net (debt)/cash |
|
|
159,665* |
(22,891) |
(409,650) |
(264,019) |
Source: Paysafe accounts, Edison Investment Research. Note: *Does not match due to change in method for reporting net debt.
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