Target Information

Verifone Systems, Inc. is a global leader in payment and commerce solutions, operating from its headquarters in San Jose, California. With a presence in over 150 countries and a network of more than 30 million devices, Verifone provides advanced solutions that transform everyday financial transactions into engaging opportunities for merchants and consumers alike. The company is undergoing a transformation, shifting from being primarily a terminal sales provider to a comprehensive payments and commerce solutions provider, leveraging technology to address the evolving needs of its clients.

In April 2018, Verifone reached a definitive agreement to be acquired by an investor group led by Francisco Partners, which also includes British Columbia Investment Management Corporation (BCI). The deal, valued at approximately $3.4 billion, offers Verifone's stockholders a cash payment of $23.04 per share, reflecting a substantial premium of about 54% over its share price on the day prior to the announcement.

Industry Overview

The payments and commerce solutions industry is experiencing significant transformation, driven by technological advancements and shifting consumer behaviors. In particular, the adoption of digital payment methods is rapidly increasing as consumers favor convenience and speed in their transaction processes. In the United States, this trend is underscored by the growing reliance on mobile wallets, contactless payments, and e-commerce platforms.

The shift towards integrated payment solutions has also prompted businesses, both large and small, to reassess their payment systems. Companies are increasingly seeking solutions that not only facilitate transactions but also provide valuable insights into customer behavior and preferences. This has created a robust market for companies like Verifone, which are well-positioned to offer innovative solutions that meet these needs.

In a competitive landscape, firms are constantly innovating to enhance security, usability, and customer experience. As regulatory landscapes evolve and cyber threats grow, the demand for secure transaction methods is becoming paramount. Consequently, businesses are seeking providers with strong technology foundations to maintain security while delivering seamless service.

Verifone is strategically positioned to capitalize on these trends, given its extensive product offerings and established track record in the payments sector. The successful transition to a software-centric model is essential for continued growth, particularly as more companies look to integrate payment processing with their existing infrastructure.

Rationale Behind the Deal

The acquisition of Verifone by Francisco Partners and BCI serves multiple strategic objectives. The cash premium of 54% offered to stockholders illustrates Francisco Partners' confidence in Verifone’s potential and their commitment to driving its growth. This investment is not merely financial; it aims to further accelerate Verifone's transformation into a robust technology-driven entity that can compete effectively in the evolving payment space.

By leveraging Francisco Partners' expertise and resources, Verifone anticipates gaining the necessary support to enhance its innovation capabilities, expand its market reach, and improve client relationships. Furthermore, the acquisition will allow Verifone to focus on long-term growth strategies without the pressures of public market scrutiny.

Information about the Investor

Francisco Partners is a prominent private equity firm that focuses on investing in technology and technology-enabled services businesses. Founded over 18 years ago, it has raised more than $14 billion in capital and invested in a wide array of technology companies. Francisco Partners employs its substantial sectoral knowledge and operational acumen to help businesses achieve their full potential, making it one of the leading investors in the tech industry.

British Columbia Investment Management Corporation (BCI), a major institutional investor managing approximately C$135.5 billion in net assets, is also part of the investor group. BCI invests across all major asset classes, including private equity, and supports long-term growth for its clients, which include public sector pension plans and insurance funds.

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The acquisition of Verifone by Francisco Partners and BCI is likely a well-considered investment strategy that capitalizes on Verifone's potential in the rapidly evolving payments space. The significant cash offer signals robust interest in the company's trajectory and a strong belief in its transformative journey. As digital payments continue to expand, Verifone's position as a key player in this industry makes it an attractive asset for long-term growth.

There is also merit in Verifone's strategic shift towards becoming a software-centric provider, which aligns well with market demands. This transition enables the company to provide more comprehensive solutions that meet the intricacies of modern payment processing needs, thus positioning it to compete effectively against emerging players in the sector.

However, potential risks remain, including the need for Verifone to navigate regulatory environments effectively and respond to customer expectations. Stakeholders should monitor how the new leadership under Francisco Partners will address these challenges to facilitate growth and innovation. Overall, the acquisition appears to present a favorable outlook for both the investors and Verifone as it embarks on this new chapter.

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