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Screenshot of a breaking news alert e-mail from Q2 2017
Continuing the rapid consolidation and M&A activity sweeping the online payments business, the board of Paysafe Group Plc (LON:PAYS) has decided to recommend a £2.96 billion (USD $3.9 billion) buyout of the company by private equity fund groups Blackstone Group LP (NYSE:BX) and CVC Capital Partners.
The Paysafe Board was initially approached by the consortium in early May 2017, and a formal announcement that a bid for Paysafe was being pursued was revealed on July 21.
Paysafe reported its first $1 billion revenue year in 2016, with top line revenue growth of 63%. Paysafe operates the Skrill and NETELLER online payments brands.
Interestingly, the Paysafe buyout – at 590 pence per share – come just eight months after the company’s shares were hit hard in December, when a report issued by short selling firm Spotlight Research surfaced. The report questioned Paysafe’s ties to one of its largest clients bet365 and its role in facilitating supposedly not-so-legal gaming activities by Chinese clients. Paysafe shares reacted by trading down as much as 38% to just above 300 pence, with Paysafe responding by calling the report inaccurate.
The full announcement made by Paysafe regarding the Blackstone-CVC buyout reads as follows:
4 August 2017
RECOMMENDED CASH OFFER
PAYSAFE GROUP PLC
PI UK BIDCO LIMITED
(a newly formed company jointly-owned by a consortium of funds managed by Blackstone and funds managed and/or advised by CVC)
to be effected by way of a scheme of arrangement under section 152 of the Isle of Man Companies Act 1931
· The boards of Paysafe Group plc (“Paysafe”) and Pi UK Bidco Limited (“Bidco”), a newly-incorporated company jointly-owned by funds managed by Blackstone (the “Blackstone Funds”) and funds managed and/or advised by CVC (the “CVC Funds”, together with the Blackstone Funds, the “Consortium”), are pleased to announce that they have reached agreement on the terms of a recommended cash offer to be made by Bidco for the entire issued and to be issued ordinary share capital of Paysafe (the “Acquisition”).
· It is intended that the Acquisition will be implemented by way of a Court-sanctioned scheme of arrangement under section 152 of the Isle of Man Companies Act 1931. Bidco reserves the right to elect, with the consent of the Takeover Panel and subject to the terms of the Bid Conduct Agreement, to implement the Acquisition by way of a Takeover Offer for the entire issued and to be issued ordinary share capital of Paysafe as an alternative to the Scheme.
· Under the terms of the Acquisition, each Paysafe Shareholder will be entitled to receive:
590 pence in cash per Paysafe Share
· The Acquisition values the entire issued and to be issued ordinary share capital of Paysafe at approximately £2.96 billion.
· The Acquisition Price represents a premium of:
· approximately 42 per cent. to the Volume Weighted Average Price per Paysafe Share during the twelve month period ended 30 June 2017, the day prior to broad sector consolidation speculation; and
· approximately 34 per cent. to the Volume Weighted Average Price per Paysafe Share during the six month period ended 30 June 2017, the day prior to broad sector consolidation speculation.
· Pi Topco Limited, an indirect holding company of Bidco, has entered into a share purchase agreement with Spectrum Global Limited, whereby Paysafe Merchant Services Limited (“PMSL”), a subsidiary of Paysafe through which it conducts Paysafe’s Asia Gateway business, will be sold to Spectrum Global Limited (the “PMSL Disposal”). It is anticipated that, subject only to receipt of mandatory regulatory clearances, completion of the PMSL Disposal shall occur upon completion of the Acquisition. The Neteller business of PMSL shall be retained within the Paysafe Group as part of the PMSL Disposal. If the Acquisition is not completed, the PMSL Disposal shall not occur. Paysafe’s Asia Gateway business generated EBITDA of approximately $50 million in the twelve months ended 31 December 2016 on revenue of approximately $131 million. The consideration payable by Spectrum Global Limited will be deferred beyond an initial amount of $5 million. The total consideration to be paid is not certain but will not exceed $308 million payable over a six year period.
· The Paysafe Independent Directors, who have been so advised by Lazard as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Paysafe Independent Directors, Lazard has taken into account the commercial assessments of the Paysafe Independent Directors.
· Accordingly, the Paysafe Independent Directors intend to recommend unanimously that Paysafe Independent Shareholders vote or procure votes in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting, as the Paysafe Independent Directors have irrevocably undertaken to do in respect of their own beneficial holdings of 74,863 Paysafe Shares (representing, in aggregate, approximately 0.02 per cent. of the Paysafe Shares in issue on 3 August 2017 (being the last Business Day prior to this Announcement)).
· In addition to the irrevocable undertakings from the Paysafe Independent Directors, Bidco has also received irrevocable undertakings from Joel Leonoff and Brian McArthur-Muscroft to vote or procure votes in favour of the Resolutions to be proposed at the General Meeting, save for the Resolution to approve the Director Manager Arrangements, in respect of 10,041,646 Paysafe Shares (representing, in aggregate, approximately 2.07 per cent. of the Paysafe Shares in issue on 3 August 2017 (being the last Business Day prior to this Announcement)).
· In addition to the irrevocable undertakings from Joel Leonoff and Brian McArthur-Muscroft and the Paysafe Independent Directors, Bidco and Paysafe have received letters of intent to vote or procure votes in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting (or, if Bidco exercises its right to implement the Acquisition by way of a Takeover Offer, to accept such offer) from Old Mutual Global Investors (UK) Limited and Threadneedle Asset Management Limited in respect of 57,897,763 Paysafe Shares (representing, in aggregate, approximately 11.94 per cent. of the Paysafe Shares in issue on 3 August 2017 (being the last Business Day prior to this Announcement)).
· Therefore, as at the date of this Announcement, Bidco and Paysafe have received irrevocable undertakings and letters of intent to vote or procure votes in favour of the Scheme at the Court Meeting with respect to a total of 57,972,626 Paysafe Shares (representing approximately 12.21 per cent. of the Paysafe Shares in issue on 3 August 2017 (being the last Business Day prior to this Announcement)), excluding the Paysafe Shares held by Joel Leonoff and Brian McArthur-Muscroft who are unable to vote at the Court Meeting. Full details of the irrevocable undertakings and letters of intent received by Bidco and Paysafe are set out in Appendix III to this Announcement.
· Bidco is a newly incorporated company, formed on behalf of, and which is jointly-owned on a 50:50 basis by, the Blackstone Funds and CVC Funds, for the purpose of implementing the Acquisition.
· Blackstone, founded in 1985 and publicly listed since 2007, is one of the world’s leading investment firms with assets under management of over $371 billion, as at 30 June 2017.
· CVC, founded in 1981, is a leading global private equity and investment advisory firm. The CVC Funds have a diverse portfolio of investments in more than 50 companies worldwide, and together these companies have combined annual sales of approximately $55 billion.
· It is intended that the Acquisition be implemented by way of a Court-sanctioned scheme of arrangement under section 152 of the Isle of Man Companies Act 1931. The purpose of the Scheme is to provide for Bidco to become the owner of the whole of the issued and to be issued ordinary share capital of Paysafe. The Scheme will be put to Paysafe Independent Shareholders at the Court Meeting and to Paysafe Shareholders at the General Meeting. In order to become effective, the Scheme must be approved by a majority in number of the Paysafe Independent Shareholders voting at the Court Meeting, either in person or by proxy, representing at least 75 per cent. in value of the Scheme Shares voted. The implementation of the Scheme must also be approved by Paysafe Shareholders at the General Meeting and the Paysafe Independent Shareholders will also be asked to approve the Director Manager Arrangements.
· The Acquisition is subject to the Conditions and certain further terms set out in Appendix I and to the full terms and conditions which will be set out in the Scheme Document. The Conditions include the receipt of various Regulatory and Anti-trust Approvals as further described in this Announcement. Shareholders should take note of the Regulatory and Anti-trust Approvals, which include financial services authority clearances in the UK, the Isle of Man, Switzerland and Mauritius and anti-trust clearances in the European Union, the United States, Canada, China and Turkey, contained in Part A of Appendix I (see paragraph 6 below).
· The Scheme Document will include full details of the Acquisition, together with notices of the Court Meeting and General Meeting and the expected timetable and will specify the action to be taken by Paysafe Shareholders. The Scheme Document will be despatched to Paysafe Shareholders within 28 days of the date of this Announcement, unless Bidco and Paysafe otherwise agree, and the Takeover Panel consents, to a later date.
· The Acquisition is expected to complete in the fourth quarter of 2017, subject to the satisfaction or waiver of the Conditions and certain further terms set out in Appendix I and to the full terms and conditions which will be set out in the Scheme Document.
· Paysafe expects to publish its results for the half year ended 30 June 2017 at 7.00 am BST on 8 August 2017.
Commenting on the Acquisition, Dennis Jones, Chairman of Paysafe, said:
“Paysafe has been on a remarkable journey, undergoing significant transformation and generating substantial shareholder value. The offer from the Consortium represents an opportunity for shareholders to crystallise a certain cash value from their investment in Paysafe. The Paysafe Independent Directors believe that Paysafe will continue to play a key role in payments innovation, leveraging the state of the art technology it has built over a number of years.”
Commenting on the Acquisition, Martin Brand, Senior Managing Director of Blackstone, said:
“We are delighted that our proposal has been recommended by the Board and excited by the prospect of working with management to develop Paysafe as one of the leading, global providers of online and mobile payment solutions. Paysafe’s innovative alternative payment systems and risk management capabilities form a strong value proposition for consumers and merchants alike. As a leading technology investor, Blackstone believes that Paysafe is an ideal platform for continued innovation in the payments space, and look forward to supporting Paysafe’s growth both organically and through acquisitions.”
Commenting on the Acquisition, Peter Rutland, Partner, Global Co-Head of Financial Services of CVC, said:
“Paysafe is an important and innovative online payments partner for merchants and customers across the globe. Our investment experience in financial services, and particularly the payments sector, provides us with the ability to understand and value the company and its future growth. We are very grateful to have the opportunity to invest in Paysafe and look forward to helping support its growth going forwards.”