- All cash transaction of $960 million, representing major
milestone in the company’s One Deluxe. transformation and largest
transaction in company’s 106-year history.
- Doubles company’s Payments segment revenue while maintaining
healthy margins and accelerating overall company growth through
product innovation, cross-sell, and future acquisitions.
- Pro forma annual recurring revenue of more than $600 million
from the combined Payments segment further establishes the
company’s leadership within the payments sector.
- Enables Deluxe to enter the attractive merchant services
market, featuring high secular growth rates and recurring revenue,
as a scaled player.
- Adds leading merchant services technology platform and
omni-channel solutions to open significant opportunities with
independent software providers, small businesses, and financial
institutions.
- Expands scale of and leverages Deluxe’s integrated sales and
distribution system, which already supports thousands of financial
institutions, millions of small businesses, and hundreds of the
world’s leading brands.
- Transaction to be financed with a combination of secured and
unsecured debt.
- Announces preliminary first quarter 2021 results.
Deluxe (NYSE: DLX), a Trusted Business Technology™ company,
today announced an agreement to acquire First American Payment
Systems (“First American”) for $960 million in cash, subject to
customary adjustments. This transaction is expected to accelerate
the company’s transformation into a leading payments technology
company as part of its One Deluxe strategy.
First American is a privately owned, industry-leading,
large-scale payment processor. The company provides partners and
merchants with comprehensive in-store, online, and mobile payment
solutions, including powerful digital payment processing services
that help customers navigate through traditional, mobile, and
virtual point-of-sale channels. With the acquisition of First
American, Deluxe is expected to double the annual revenue of its
Payments segment while maintaining healthy margins, firmly
establishing Deluxe as a leader in the payments industry.
“This is a major, logical and responsible next step in our
transformation. With electronic payments playing an increasingly
important role across the economy, the addition of First American’s
independent, leading payments platform will advance our One Deluxe
strategy and our overall growth trajectory,” said Barry McCarthy,
President and CEO of Deluxe. “Deluxe serves an integral part of the
payments industry, with our software and services processing more
than $2.8 trillion annually. First American’s end-to-end payments
platform presents significant cross-sell opportunities as we
continue to invest in our higher growth Payments segment, and this
combination will create a multitude of opportunities to drive
tremendous value for our shareholders.”
“Our acquisition of First American will enable Deluxe to
participate in merchant services, a part of the strong secular
growth payments industry,” said Michael Reed, President of Payments
for Deluxe. “With this combination, Deluxe and First American
customers will have access to a broader array of valuable and
robust technology services and solutions. We expect to offer these
merchant services to our thousands of financial institution
customers, millions of small businesses and hundreds of the world’s
biggest brands through our established and highly effective sales
and distribution system. Importantly, we are excited to welcome
First American to our shared customer-centric culture and strong
platform for revenue growth, capital investment, and future job
opportunities.”
“Today’s announcement is a testament to the accomplishments of
the First American team over the last 30 years that have
established our company as a deeply trusted payments partner with
an unwavering focus on customer service,” said Neil Randel, Chief
Executive Officer of First American. “In joining forces with a
Fortune 1000 publicly traded company, we are advancing our mission
to create innovative solutions as we continue to help our customers
succeed and prosper. I look forward to working closely with Barry,
Mike and the team to exponentially grow our combined company and
deliver enhanced value to all of our stakeholders.”
Upon close of the transaction, the First American management
team will join the Deluxe Payments team, and Randel will become
Managing Director, Merchant Services.
Joining Two Payments Platforms Expected to Create Powerful
Scale and Significant Growth Opportunities
- The combination is expected to generate significant near-term
revenue synergies.
- The addition of First American’s scalable, omni-channel payment
technology and proprietary back-end processing and settlement
platform will further advance the Deluxe transformation.
- The combination of First American’s diversified distribution
channels of independent software vendors (ISVs), financial
institutions (FIs), and independent sales organizations with
Deluxe’s thousands of FIs and millions of small business customers
will add cross-sell opportunities and significantly expand
distribution scale.
- Deluxe anticipates cross-selling opportunities in new
verticals, including government, not-for-profit and retail, among
others, supporting the unified One Deluxe approach to sales,
technology, and customer relationships.
- First American brings new capabilities to help businesses
consolidate their platforms and integrate payments through powerful
yet simple-to-use point-of-sale solutions.
- First American’s technology platform will enable Deluxe to
engage in dynamic innovation across its three other business
segments (Cloud Solutions, Promotional Solutions and Checks) and
enables a broader range of future M&A opportunities.
- Having operated a successful business for over 30 years, First
American’s management team brings substantial payments expertise
that will enhance the strong bench of talent in place at
Deluxe.
Preview of Preliminary First Quarter 2021 Results
(unaudited)
- Deluxe delivers a strong start to 2021, steadily improving
sequential performance as promised, and exceeded consensus
expectations. Adjusted EBITDA is expected to be up 7% to 9% year
over year.
- Adjusted EBITDA margin is anticipated to increase 300 to 350
basis points year over year.
- Release of first quarter 2021 financial results and conference
call scheduled for May 6, 2021.
Transaction Details
The transaction, which is subject to customary closing
conditions and regulatory approvals, is expected to close in the
second quarter of 2021. The transaction is not subject to any
financing condition.
Deluxe will finance the acquisition with a combination of
secured and unsecured debt. Following completion, the company’s
expected net debt to adjusted EBITDA ratio is expected to be
approximately 4.0x, with a long-term target leverage ratio of
approximately 3.0x, or below.
Advisors
Cowen is serving as Deluxe’s exclusive financial advisor, while
Weil, Gotshal & Manges LLP and Troutman Pepper Hamilton Sanders
LLP are serving as legal counsel to Deluxe in connection with the
transaction.
Fried, Frank, Harris, Shriver & Jacobson LLP is serving as
legal counsel to First American.
Conference Call and Webcast
Deluxe will host a conference call today, April 22, 2021 at 8:30
a.m. ET to discuss the transaction. Interested parties may access
the conference call via the investor relations page at
www.deluxe.com/investor and callers in North America may dial
833-282-0028 (access code 4733219). A replay of the call will be
available after 11:30 a.m. ET through midnight on April 29, 2021 by
dialing 800-585-8367 (access code 4733219).
About Deluxe Corporation
Deluxe, a Trusted Business Technology™ company, champions
business so communities thrive. Our solutions help businesses pay
and get paid, accelerate growth and operate more efficiently. For
more than 100 years, Deluxe customers have relied on our solutions
and platforms at all stages of their lifecycle, from start-up to
maturity. Our powerful scale supports millions of small businesses,
thousands of vital financial institutions and hundreds of the
world’s largest consumer brands, while processing more than $2.8
trillion in annual payment volume. Our reach, scale and
distribution channels position Deluxe to be our customers’ most
trusted business partner. To learn how we can help your business,
visit us at www.deluxe.com, www.facebook.com/deluxecorp,
www.linkedin.com/company/deluxe, or www.twitter.com/deluxe.
About First American
First American Payment Systems, L.P., headquartered in Fort
Worth, Texas, is a global payment technology company providing
leading integrated payment solutions to more than 159,000 merchants
throughout the Americas and Europe. First American provides partner
and merchant payment solutions that include a robust set of
in-store, online and mobile payment solutions paired with the
latest in payment security, across a wide range of verticals.
Backed by award-winning customer service, merchants and partners
have access to our U.S. based Customer Call Center 24/7/365. For
more information, visit http://www.first-american.net.
Forward-Looking Statements
Statements made in this release concerning Deluxe, the company’s
or management’s intentions, expectations, outlook or predictions
about future results or events are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements reflect management’s current intentions or
beliefs and are subject to risks and uncertainties that could cause
actual results or events to vary from stated expectations, which
variations could be material and adverse. Factors that could
produce such a variation include, but are not limited to, the
following: potential continuing negative impacts from pandemic
health issues, such as the coronavirus / COVID-19, along with the
impact of government restrictions or similar directives on our
future results of operations, our future financial condition and
our ability to continue business activities in affected regions;
the impact that further deterioration or prolonged softness in the
economy may have on demand for the company’s products and services;
the company’s ability to execute its transformational strategy and
to realize the intended benefits; the inherent unreliability of
earnings, revenue and cash flow predictions due to numerous
factors, many of which are beyond the company’s control; declining
demand for the company’s checks, check-related products and
services and business forms; risks that the company’s strategies
intended to drive sustained revenue and earnings growth, despite
the continuing decline in checks and forms, are delayed or
unsuccessful; intense competition; continued consolidation of
financial institutions and/or additional bank failures, thereby
reducing the number of potential customers and referral sources and
increasing downward pressure on the company’s revenue and gross
profit; the risk the contemplated transaction and/or other future
acquisitions will not be consummated; risks that any such
acquisitions do not produce the anticipated results or synergies;
risks that the company’s cost reduction initiatives will be delayed
or unsuccessful; performance shortfalls by one or more of the
company’s major suppliers, licensors or service providers;
unanticipated delays, costs and expenses in the development and
marketing of products and services, including web services and
financial technology and treasury management solutions; the failure
of such products and services to deliver the expected revenues and
other financial targets; risks related to security breaches,
computer malware or other cyber-attacks; risks of interruptions to
the company’s website operations or information technology systems;
risks of unfavorable outcomes and the costs to defend litigation
and other disputes; and the impact of governmental laws,
regulations or investigations. The company’s forward-looking
statements speak only as of the time made, and management assumes
no obligation to publicly update any such statements. Additional
information concerning these and other factors that could cause
actual results and events to differ materially from the company’s
current expectations are contained in the company’s Form 10-K for
the year ended December 31, 2020. The company undertakes no
obligation to update or revise any forward-looking statements to
reflect subsequent events, new information or future
circumstances.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210422005427/en/
Tom Morabito, VP, Investor Relations 470-607-5567
tom.morabito@deluxe.com
Cam Potts, VP, Communications 651-233-7735
cameron.potts@deluxe.com
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