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Verifone (PAY) to Go Private for $3.4 Billion, Shares Up 52%


Verifone Systems, Inc. PAY announced on Apr 9, 2018 that it has entered into a definitive agreement to be acquired by an investor group led by San Francisco-based Francisco Partners and Canada-based British Columbia Investment Management Corporation.

Deal Details

The investor group will buy Verifone for $23.04 per share in cash. The value represents a total consideration of approximately $3.4 billion, inclusive of Verifone’s net debt.

Verifone’s shareholders will receive $23.04 per share in cash, which is about 54% higher than the stock’s closing price of $15.00 on Apr 9, 2018.

The deal also includes a ‘go shop’ period till May 24, 2018. In the interim, VeriFone’s board of directors and advisers can seek bids from other companies for alternative buyout proposals.

Subject to customary regulatory and shareholder approvals, the deal is expected to close in third-quarter 2018. Post completion of the deal, Verifone will become a privately-held company.

Share Price Skyrockets

Following the announcement of the deal, shares of Verifone gained 51.9% to close the trading session on Apr 10 at $22.78.

Moreover, the stock has performed pretty well in the past six months. Shares have returned 11.8%, outperforming the S&P 500 Index’s and industry’s rise of 4.3% and 10.9%, respectively.

Verifone Fails to Withstand Mounting Competition

Rapid adoption of new payment methods like contactless, NFC as well as mobile cloud-based payments, robust product portfolio, optimistic acquisitions and growth opportunities in under-penetrated countries are some of the strategic business initiatives undertaken by Verifone to strengthen foothold in the industry.

Despite such strategies,mounting competition from lower-cost, mobile alternatives likes Square SQ, entry of new market entrants and latest technologies, declining revenues, divestures as well as buyout-related woes continued to bother VeriFone. A leveraged balance sheet is another headwind.

Notably, for the past two fiscal years, the company reported declining revenues. Net revenues decreased 0.4% year over year in 2016 and 6.1% in 2017. We believe that the divestment decision was triggered by this continuous decline. Annual revenues are expected to decrease further in the upcoming days.

Zacks Rank & Other Stocks to Consider

Verifone is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

A few other top-ranked stocks in the broader Business Services sector include Global Payments GPN and Mastercard MA. Global Payments is a Zacks Rank #1 stock, Mastercard carries a Zacks Rank #2.

The projected earnings growth rate (3-5 years) for Global Payments and Mastercard is 15.8% and 18.3%, respectively.

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