Information on the Target

Verifone Systems, Inc. (NYSE: PAY) is a prominent player in payment and commerce solutions, with a broad footprint encompassing over 30 million devices across more than 150 countries. With a strong commitment to security and innovation, Verifone is transitioning from a traditional terminal provider to a comprehensive payments and commerce solutions provider. The company's diverse client base includes some of the most recognized retail brands and financial institutions worldwide, making it a trusted partner in addressing complex payment challenges.

On April 9, 2018, Verifone's stockholders were offered a cash payment of $23.04 per share as part of a definitive acquisition agreement led by Francisco Partners, in collaboration with British Columbia Investment Management Corporation (BCI). This offer represents a significant premium of approximately 54% over Verifone's closing share price of $15.00 on the same day, indicating a total enterprise value of roughly $3.4 billion, inclusive of Verifone’s net debt.

Industry Overview

The global payments and commerce solutions industry is undergoing rapid transformation, driven by technological advancements and shifting consumer preferences towards digital transactions. Companies within this sector are increasingly focusing on providing integrated solutions that combine hardware and software to enhance user experience and streamline payment processes.

In the United States, the payments landscape is particularly dynamic. Growth in e-commerce, mobile payments, and contactless technologies is reshaping how consumers and merchants interact. As consumers increasingly seek convenience and faster transaction methods, companies must innovate rapidly to remain competitive.

Moreover, regulatory changes and evolving security standards are also influencing the industry. Professionals must navigate a sometimes complex regulatory environment while maintaining consumer trust in payment security. This ongoing evolution highlights the need for companies like Verifone to leverage their expertise and implement robust security measures continuously.

With the move towards a more software-centric ecosystem, the demand for sophisticated payment solutions is expected to grow. Companies that can effectively integrate technology into their offerings will likely thrive, making strategic partnerships and acquisitions valuable for those aiming to enhance market positioning.

The Rationale Behind the Deal

The acquisition of Verifone by Francisco Partners and BCI is fundamentally aimed at capitalizing on the company’s transformation trajectory. The strategic investment aligns with Francisco Partners' commitment to growing technology-driven businesses, particularly in areas with robust long-term growth prospects. By providing Verifone with the necessary resources and expertise, the investors aim to accelerate its development and expansion into new markets.

This investment also reflects the investors' confidence in Verifone's ability to leverage its technology and innovations in the payments space, enhancing the company's capacity to address emerging challenges in the industry and uplift its offerings to better serve clients.

Information About the Investor

Francisco Partners is a leading global private equity firm that specializes in investments within the technology sector. With over 18 years of experience, the firm has raised more than $14 billion in committed capital and invested in over 200 technology companies, showcasing its strong foothold in the industry. Francisco's investment philosophy is centered on utilizing deep sector knowledge and operational expertise to maximize the potential of its portfolio companies.

British Columbia Investment Management Corporation (BCI) is another key player in this agreement. As one of Canada's largest institutional investors, BCI manages a diversified portfolio valued at C$135.5 billion and invests across multiple asset classes, including private equity. BCI's long-term investment approach and commitment to sustainability make it an ideal partner in this strategic acquisition.

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The decision to acquire Verifone by Francisco Partners and BCI can be perceived as a strategic and potentially lucrative investment given the company's transformative potential within the payments ecosystem. Verifone's established presence and recognized brand in the highly competitive landscape indicate that, with the right support, it can effectively enhance its product offerings and market reach.

Furthermore, the substantial premium offered to Verifone’s stockholders signifies the investors' optimism regarding Verifone’s future growth prospects. The partnership is likely to facilitate accelerated innovation in Verifone's product lines, particularly as the company continues to advance its capabilities in payment processing and commerce integration.

Additionally, considering the ongoing trends towards digital and seamless payment solutions, the investment aligns well with market needs. Verifone's anticipated evolution into a more software-centric solution provider positions it favorably to capture emerging opportunities in an increasingly digital world.

Overall, this acquisition not only underscores the value of Verifone’s existing operations but also highlights the potential for future expansion and profitability in a rapidly evolving industry.

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