Here’s why EML Payments (ASX:EML) should be on investors’ radar

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Summary

  • EML Payments announced that it has signed a binding Share Purchase Agreement to acquire a 100 per cent stake in Sentenial.
  • The acquisition will be funded by €38.9 million (A$60.3 million) cash on hand and a new multicurrency debt facility.
  • With scheme payments and A2A payment solutions all under one roof, EML and Sentenial are uniquely positioned to support clients.

On 7 April 2021, EML Payments Limited (ASX:EML) announced that it has signed a binding Share Purchase Agreement to acquire a 100 per cent stake in Sentenial Limited and its wholly-owned subsidiaries, including their open banking product, Nuapay. The deal has been made at an upfront enterprise value of €70 million (A$108.6 million), with an earn-out component of up to €40 million (A$62.1 million).

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The acquisition broadens the company’s offerings to include alternate (non-card, non-scheme) payment products to its existing platform that would enable it to address customer demand, complementing card scheme-based payments.

Details of the funding

The acquisition will be funded by €38.9 million (A$60.3 million) cash on hand and a new multicurrency debt facility, of which A$31 million will be drawn. The company has secured a total facility of almost A$225 million to support working capital and the business's future growth, which includes a A$100 million accordion facility. This facility will provide the Group with flexibility for future M&A opportunities as they arise.

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A total of €31.1 million (A$48.2 million) would be spent for scrip consideration (an issue of new EML shares) to Vendors at a ten-day volume-weighted average price (VWAP) to signing this agreement, equating to approximately 9.6 million shares or 2.9% of the issued shares of the company. About 60% of this new issue will be subject to a six-month restriction from the sale.

Another €40 million (A$62.1 million) would be utilized towards an earn-out consideration, contingent on the achievement of earn-out targets correlating to incremental Open Banking revenue of €27 million (A$41.9 million) in the 12 months ending on 31 December 2023. Whether earn-out consideration is payable in cash or equity is at the company’s discretion.

The last €2.5 million (A$3.9 million) of the cash consideration will be held in escrow for 12 months following completion of the acquisition for claims made under the agreement alongside a Warranty & Indemnity Insurance Policy.

Read More: EML Payments (ASX:EML) climbing up the ASX ladder post 42% EBITDA uptick

Strategic Rationale

After the acquisition, EML will become a leading player and one of the largest independent FinTech enablers in Open Banking and prepaid anywhere in the world.

Sentenial has a highly scalable platform that has witnessed continual investment to future proof the business and allows for agile deployments and rapid growth. EML is well-positioned to export the technology globally.

With scheme payments and A2A payment solutions all under one roof, EML and Sentenial are uniquely positioned to support clients.


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