Optimal Payments Plc (LON:OPAY) a global provider of online and mobile payment processing services, has entered into an agreement to acquire Sentinel Topco Limited and its subsidiaries (“Skrill” or “Skrill Group”) from Sentinel Group Holdings S.A., ultimately owned by funds managed and advised by subsidiaries of CVC Capital Partners SICAV-FIS S.A., Investcorp Technology Partners, and other shareholders, for an enterprise value of approximately €1.1 billion ($1.2 billion) (the “Acquisition”).
The Skrill Group is one of Europe’s leading digital payments businesses providing digital wallet solutions and online payment processing capabilities and is one of the largest prepaid online voucher providers in Europe with its paysafecard brand. Furthermore, the Skrill service is a very popular payment provider and digital wallet intermediary within the online Forex brokerage community.
It is clear the two firms have highly complementary businesses and make a compelling strategic fit. Optimal Payments will become the clear leading global player in the digital wallet category with the NETELLER and Skrill digital wallet brands under one roof.
Dennis Jones, Chairman of Optimal Payments, said: “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. 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.”
Complementary business combination will create a leading payment provider
Recent historical financials of the two brands. (Click image to enlarge).
Financing of the Acquisition
The cash consideration will be financed through a combination of available cash, new debt facilities and a fully underwritten Rights Issue. Bank of Montreal, Barclays Bank PLC and Deutsche Bank Luxembourg S.A. have committed to provide financing for the Acquisition via credit facilities of €500 million.
Following the Acquisition, Optimal Payments is expected to have pro-forma net leverage of approximately 3.1x . It is expected that the strong operating cash flow profile of the combined business will enable the Enlarged Group to de-lever rapidly in the medium term. Optimal Payments is proposing to raise approximately £451 million through a Rights Issue of 5 New Ordinary Shares at 166 pence per share for every 3 Existing Ordinary Shares. The Rights Issue has been fully underwritten by Canaccord Genuity, Deutsche Bank and BMO Capital Markets.
The Offer Price for the Rights Issue represents:
- a 34 per cent discount to the theoretical ex-rights price of an Existing Ordinary Share, when calculated by reference to the volume weighted average price of approximately 398 pence per Existing Ordinary Share during the 5 day period between March 16, 2015 and March 20, 2015 (being the last practicable Business Day before the announcement of the Rights Issue)
- a 36 per cent discount to the theoretical ex-rights price of an Existing Ordinary Share, when calculated by reference to the Closing Price of 419 pence per Existing Ordinary Share on March 20, 2015; and
- a 60 per cent discount to the Closing Price of 419 pence per Existing Ordinary Share on March 20, 2015.
Strong support of shareholders
Optimal Payments has consulted with its largest shareholders, which in aggregate own over 50% of the Existing Ordinary Shares, and has received very significant support for the Acquisition. Optimal Payments’ largest shareholder, Old Mutual Global Investors, has signed an irrevocable undertaking to vote in favour of the Acquisition in respect of 18,422,092 shares representing 11.3% of the Existing Ordinary Shares. Thornburg Investment Management has also signed an irrevocable undertaking to vote in favour of the Acquisition in respect of 8,233,781 shares representing 5.0% of the Existing Ordinary Shares. In aggregate, irrevocable undertakings from institutional shareholders to vote in favour of the Acquisition have therefore been received in respect of 26,655,873 Existing Ordinary Shares, representing 16.3% of total Existing Ordinary Shares.
Furthermore, each of the Directors who holds Ordinary Shares (which in aggregate represent 2.55% of the Existing Ordinary Shares) is fully supportive of the Acquisition and the Rights Issue. Each of the Directors who holds Ordinary Shares either intends, to the extent that he is able, to take up in full his rights to subscribe for New Ordinary Shares under the Rights Issue or to sell a sufficient number of his Nil Paid Rights during the Nil Paid Rights trading period to meet the costs of taking up the balance of his entitlements to New Ordinary Shares.
Shareholder meeting and next steps
Optimal Payments will request a suspension of trading in Ordinary Shares until the firm has published and made available an Admission Document. The Acquisition and the Rights Issue are conditional upon the approval of Shareholders at the General Meeting. The General Meeting is expected to be held on April 16, 2015. The New Ordinary Shares will, when issued and fully paid, rank equally in all respects with the Existing Ordinary Shares, including the right to receive all dividends or other distributions made, paid or declared, if any, by reference to a record date after the date of their issue.
Subject to Shareholder approval, it is expected that application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. It is expected that Rights Issue Admission will become effective and that dealings in the New Ordinary Shares, nil paid, will commence on AIM at 8.00 a.m. on April 17, 2015. Completion of the Acquisition is expected in the third quarter of 2015
For complete details on the deal, click here.
To view the investor presentation regarding the acquisition, click here.