Zacks_Analysts' Blog : VeriFone Buys Point in Europe - Analyst Blog

VeriFone Systems Inc. (PAY) recently completed the acquisition of Point, one of Northern Europe’s largest providers of payment and gateway services and solutions for retailers.

Based in Stockholm, Point provides payment and gateway services and solutions for retailers in Northern Europe. Founded in 1988, the company has operations in 11 Northern European countries and currently serves a captive network with over 475,000 merchants. Nordic Capital acquired Point in 2004.

Point offers retailers a full range of services and solutions, including point-of-sale technology and support, gateway services, card encryption services, and multi-channel e-commerce processing. VeriFone plans to extend the Point platform throughout the European region and other parts of the world as well.

In November 2011, VeriFone signed a definitive agreement with Nordic Capital Fund V to acquire European-based Point for approximately €600 million or $824 million. VeriFone will also retire Point’s debt of approximately €170 million.

The transaction is expected to be accretive to the bottom-line by $0.08 – $0.10 in fiscal 2012 and by $0.30 – $0.35 in fiscal 2013. 

VeriFone expects the acquisition to add approximately $260 million to  the top-line in the first year. The acquisition is also expected to be immediately accretive to gross margins, operating margins and growth rates. VeriFone expects total services revenue to exceed 30% of total sales in fiscal 2012 and 50% by fiscal 2015.

Meanwhile, to finance the Point acquisition and refinance existing debt, VeriFone has executed a credit agreement for $1.5 billion led by J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities LLC, Barclays Capital and RBC Capital Markets.

The debt consists of 5-year Term A Loans for $918.5 million, a 5-year revolving line of credit for $350.0 million, and 7-year Term B Loans for $231.5 million. In addition, a portion of the proceeds will also be used to repay VeriFone’s outstanding 1.375% Convertible Notes due June 2012.

Last month, VeriFone reported in-line numbers for the fourth quarter of fiscal 2011. Earnings estimates increased by $0.12 thereafter.

We continue to maintain a Neutral recommendation on VeriFone. In the short-run, we have a Zacks #1 Rank, which translates into a short-term rating of Strong Buy.