Verifone to go private for $3.4bn

June 2018 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

June 2018 Issue

Payments technology company Verifone Systems Inc is to be taken private by an investor group led by private equity firm Francisco Partners in a $3.4bn cash deal.

Under the terms of the agreement, which has been unanimously approved by the Verifone board of directors, Verifone shareholders will receive $23.04 in cash for each share of Verifone common stock held, representing a premium of approximately 54 percent to the company’s closing share price of $15 on 9 April 2018. Verifone’s shares jumped more than 50 percent in the wake of the announcement.

The deal, which includes pre-existing debt, is not subject to any financing conditions and is expected to close during the third calendar quarter of 2018, subject to customary closing conditions, including stockholder and regulatory approvals. The merger agreement contains a ‘go-shop’ period, which will allow Verifone’s board and advisers to pursue and potentially enter into negotiations with parties that make alternative acquisition proposals until 24 May 2018.

Founded in 1981 as a manufacturer of point-of-sale (POS) terminals, Verifone’s portfolio now consists of more than 30 million devices, including POS devices, as well as payments and commerce solutions, across more than 150 countries.

“We are pleased to reach this agreement with Francisco Partners,” said Paul Galant, the chief executive of Verifone. “This transaction delivers significant cash value to our stockholders and provides compelling benefits for our clients. We believe this transaction reflects the progress we have made executing our transformation from a terminal sales company to a payments and commerce solutions provider. With Francisco Partners’ resources, expertise and track-record growing global technology businesses, we are confident that we will be better positioned to serve the needs of our clients around the globe.”

“Verifone continues to build compelling and impressive products and technology and has attractive long-term growth prospects,” said Peter Christodoulo, a partner at Francisco Partners. “We are excited to become investors and stewards of this important platform in the global payments and commerce ecosystem.”

“Verifone’s transformation from a hardware provider to a best-in-class payments and commerce solutions provider is just beginning,” said Jason Brein, a partner at Francisco Partners. “We look forward to supporting the company as it continues its evolution.”

“This investment builds on the strength of our financial technology, systems and software franchises,” said Dipanjan Deb, co-founder and chief executive of Francisco Partners. “Verifone will receive the highest focus of Francisco Partners as we support its continued growth and transformation in an increasingly software-centric world.”

The Francisco Partners-led group also includes one of Canada’s largest institutional investors within the global capital markets, British Columbia Investment Management (BCI). Francisco Partners specialises in investments in technology and technology-enabled services businesses. The firm has raised over $14bn in committed capital and invested in more than 200 technology companies to date.

Verifone has struggled of late to keep pace with the changing payments industry. The company was adversely affected by the major payment networks’ decision to postpone their deadline for fuel-pump ‘chip and pin’ technology by three years. New players in the rapidly-evolving payments space have also created difficulties. Furthermore, Verifone sold its taxi advertising unit in December 2017 for around $30m, amid pressure from ride hailing companies including Uber and Lyft.

Verifone’s revenues declined in 2017, however the company has begun to identify a path back to profitability. In a conference call following the sale of the taxi unit, Mr Galant said, “Excluding the headwinds brought on by the North America Petro EMV push-out and last year’s terminal sale surge in India, the remaining systems business revenue grew by double digits year-over-year in the period.”

Richard Summerfield