An Acquisitive Shift4 Buys Into Blockchain And Cross-Border Processing

Shift4 Payments Inc. last month said it has concluded agreements to acquire international e-commerce acquirer Finaro and cryptocurrency-based donation platform Giving Block in deals valued at $875 million in cash and stock, including future earnout provisions. The latter deal has already closed, while Allentown, Pa.-based Shift4 expects to close the much larger Finaro acquisition later this year.

The acquisitions will propel Shift4 into the growing field of cryptocurrency transactions and expand its services into international processing. The Giving Block deal, in particular, “will bring crypto capability across the [Shift4] organization,” chief executive Jared Isaacman said during an earnings call last month.

Finaro, meanwhile, will be key in supporting major new Shift4 initiatives, including its agreement to process for SpaceX’s Starlink satellite business, Isaacman added. Isaacman led an all-civilian space trip last year on a SpaceX vehicle and plans to fund three additional spaceflights with the program.

Finaro, which processes transactions in the United Kingdom, Europe, Hong Kong, and Japan, supports more than 170 alternative payment methods, vastly expanding Shift4’s currency capabilities in addition to extending the company into overseas markets in a major thrust for the first time.

The deal involves a $525-million upfront payment configured as 62% equity and 38% cash, as well as a $50-million earnout provision, to be paid in stock. For Giving Block, Shift4 has agreed to pay $54 million in cash plus stock and cash valued at $246 million in an earnout.

While Giving Block is the smaller acquisition, Isaacman said it has the potential to bring more nonprofits into Shift4’s fold. “Nonprofits don’t know a lot about crypto, they just know they want to take it,” he said.

He predicted his company’s business in the charitable-giving market could become bigger, indeed, than its stake in gaming, where in February the company signed one of its largest clients, BetMGM. It now maintains betting licenses in 10 states.

Finaro, meanwhile, is expected to contribute some $15 billion in end-to-end payment volume next year, Shift4 said. The company pays particularly close attention to end-to-end processing, in which it handles all transaction services for merchants, because it is more lucrative than its gateway business, where it passes transactions off to other processors. “We need to capture the majority of the payment economics,” Isaacman said.

Shift4 reported $13.4 billion in end-to-end payment volume in the fourth quarter, down slightly from the previous period but more than double the volume a year earlier. Some volume decline was blamed on the Omicron variant of Covid-19, which affected Shift4’s hefty stake in the hotel and restaurant sector. Hotels in particular accounted for 20% of the company’s end-to-end volume before the pandemic struck.

The variant’s effects continued to be felt into the new year. “January was particularly depressed,” said Taylor Lauber, president and chief strategy officer, during the call. But he characterized the impact as “quite short-lived,” as volumes began rebounding last month.

The company is also looking forward to the emergence from a beta-testing phase of its new SkyTab point-of-sale technology. Some 3,000 restaurants are using the devices in the beta, Isaacman said, adding, “we expect all our restaurants to convert over multiple years.”

For the quarter, Shift4 recorded $146.9 million in revenue, up 65% year-over-year but down slightly from $148.3 million in the third quarter. End-to-end volume overall recovered in late February from a “trough” in January that management blamed on Omicron. Volume in the week ending Feb. 26, in fact, recorded the highest level for one week in the company’s history.