23rd Mar 2015 10:02
LONDON (Alliance News) - Optimal Payments PLC on Monday said it is acquiring London-based payments company Skrill Ltd at an enterprise value of EUR1.1 billion from private equity company CVC Capital Partners and investment manager Investcorp Technology Partners.
Optimal said the move is designed to get the most out of Optimal's and Skrill's combined payment processing networks. Optimal also said it wants to diversify its digital wallets business, both to ensure it isn't overly reliant on online gambling and to propel growth in the key North American online gambling market.
After completing the deal, which is classed as a reverse takeover under AIM rules, Optimal said it wants move to the London Main Market and to seek a place in the FTSE 250 index.
The payments company said it will pay EUR720 million in cash - financed by a rights issue and new credit facility - and 37.5 million new shares, 23% of its current total, which will give Sentinel Group Holdings SA, the company owned by CVC Capital and Investcorp Technology, a stake of about 7.9% in Optimal. Optimal and Skrill will refinance their net debt as part of the deal.
The deal is expected to complete in the third quarter.
Optimal is funding the deal with existing cash, new credit facilities of EUR500 million provided by Bank of Montreal, Barclays Bank PLC and Deutsche Bank Luxembourg SA, and a GBP451 million rights issue under which shareholders will be given the right to buy five new shares priced at 166 pence per share for every three they already own, resulting in the issuance of 217.9 million new shares.
The pricing of the rights issue represents a 60% discount to Optimal Payments' 419 pence closing price on Friday. The stock has been suspended until the company makes available documents relating to the acquisition and rights issue.
"We are taking advantage of an exceptional opportunity to acquire a business we know very well which, combined with Optimal Payments, will be a leading UK based online payments business with the essential scale necessary to be highly successful. These opportunities are few and far between," Dennis Jones, Optimal's chairman, said in a statement.
"The board believes this transformational transaction will be earnings accretive for shareholders from the first full fiscal year of ownership, will further diversify our client base and, additionally, will enable us to deliver enhanced services to existing and prospective merchants and customers in all of our global markets," Jones added.
In addition, Optimal said the combined group could benefit from cost savings synergies of USD40 million per annum and wants to achieve that by the end of 2016. It would book USD26 million in costs by that point to "achieve" the cost savings. It also thinks there will be cross-selling opportunities and the ability to consolidate platforms.
Optimal, which sponsors Premier League football club Crystal Palace, said that more than 50% of its shareholders shown "very significant support for the acquisition. So far, it had received irrevocable undertakings from institutions representing 16.3% of its shares, representing Old Mutual Global Investors and Thornburg Investment Management.
The move came as Optimal reported a USD59.0 million pretax profit in 2014, up from USD32.7 million in the prior year, bolstered by revenue growth in merchant business NETBANX and consumer business NETELLER. Earnings before interest, tax, depreciation and amortisation grew by 65% to USD86.1 million. Trading has been in line with Optimal's expectations since the end of 2014, the company said.
According to Optimal, the Skill operating group reported revenue of EUR215.7 million and adjusted EBITDA of EUR57.8 million in 2013. Skrill operating group revenue amounted to USD248.9 million in the first nine months of 2014.
Optimal said the combined group may continue to participate in the "ongoing consolidation" of the digital payments industry, signalling that the recent wave of acquisitions made by both companies could be set to continue.
Monday's statement revealed that Optimal signed a letter of intent in February for the "small potential acquisition" of a company that specialises in mobile technology development and offers consultancy services. That follows the acquisitions of payment processor Meritus Payments Solutions and online payments company Global Merchant Advisors Inc in July 2014, when Optimal spent more than USD210 million to strengthen its hand in the US.
In November 2014, Skrill said it is to acquire Smart Voucher Ltd, which is known as Ukash, a company that allows users to exchange their cash for a secure code to make payments online. The deal is to complete in the first half of 2015. In early 2013, Skrill acquired paysafecard, which has become its pre-paid online voucher provider brand.
According to Investcorp's website, it sold Skrill to CVC Capital Partners for an enterprise value of EUR600 million in August 2013, although it retained a "substantial minority position". Investcorp initial investment of EUR25 million was made in March 2007 in return for a controlling stake in Skrill, which was founded in 2001.
By Samuel Agini; [email protected]; @samuelagini
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