Changing economics sees EML Payments renegotiate Irish fintech acquisition

EML Payments Prepaid Financial Services Irish fintech acquisition ASX
EML Payments and Prepaid Financial Services have renegotiated the terms of the pending transaction.

Payment services provider EML Payments (ASX: EML) has restructured a planned acquisition of Ireland’s Prepaid Financial Services Limited citing “economic realities” brought about by the current coronavirus pandemic.

In November, EML announced it would acquire PFS for an upfront payment of $452 million plus an earn-out over three years of $110m funded through a combination of cash, EML shares and an underwritten syndicated debt facility of $165m of which approximately $130m would have been drawn down.

It confirmed today it had been working with PFS to restructure the transaction in order to provide the combined business with a strong balance sheet, significant cash on hand and nil net debt moving through a CoVid-19 economy.

Discounted terms

The new terms include a discounted upfront amount of approximately $252m, of which a $159m cash payment will be funded entirely by EML’s $278m cash reserve following a November capital raising.

EML is also in the process of renegotiating the syndicated debt facility agreement for an undrawn senior secured revolving credit facility.

The restructured acquisition is scheduled to close this week.

“[We are] committed to seeking a conclusion to this transaction, but on improved terms which reflect the economic reality of CoVid-19 and the need to have a strong balance sheet with significant cash on hand and nil net debt,” EML said.

“The current trading environment is uncertain… PFS has two major programs in Spain and France [which have already been] negatively impacted by strict government lock down measures as a result of Covid-19.”

While it would be difficult to quantify the immediate business impact over the next three months, EML remained confident in the long-term prospects of the transaction.

World’s largest fintech

The PFS acquisition fast-tracks EML’s transition to a general purpose reloadable business which has been part of its multi-year corporate strategy.

Post-acquisition, the new combined entity is expected to become one of the world’s largest fintech enablers in open banking and prepayments circles.

It will operate in 26 countries, transact in 24 currencies and support over 3500 prepaid programs.

EML said it would benefit from increased scale, a more diversified revenue and earnings base and a stronger platform for long term growth.

At mid-afternoon, shares in EML Payments were trading 43.70% higher at $2.680.