Paysafe To Buy Merchants Choice, but Itself May Be Acquired by a Private-Equity Consortium

In a payments play on acquire and be acquired, Paysafe Group plc announced Friday that it has a deal to acquire Delta Card Services Inc., parent company of independent sales organization Merchants’ Choice Payment Solutions, for $470 million in cash. Separately, United Kingdom-based Paysafe also confirmed that it has received a preliminary, $3.7 billion buyout offer from affiliates of the private-equity firms Blackstone and CVC Capital Partners.

The pending deals continue a wave of merger-and-acquisition activity involving British processors that affects the U.S. payments market. Just this month, Ohio-based Vantiv Inc. announced a pending deal to buy merchant acquirer Worldpay Group plc, which has a substantial U.S. operation based in Atlanta, for $9.9 billion.

Paysafe until November 2015 was known as Optimal Payments plc. Optimal changed its name to Paysafe following its $1.2 billion acquisition earlier that year of Skrill Group, which specialized in digital wallets for online-gambling, e-commerce, and money transfers.

Merchants’ Choice, which is based in the Houston suburb of Shenandoah, Texas, already works with a Paysafe subsidiary called Meritus. Merchants’ Choice serves 60,000 mostly small and mid-sized merchants in all 50 states and generates more than $14 billion in sales volume annually, according to Paysafe. The ISO’s revenues totaled $446 million in 2016, and it posted pre-tax earnings of $18.4 million.

“The acquisition of MCPS expands Paysafe’s processing scale and product set for ISOs and merchants in North America,” Paysafe said in its announcement. “The addition of point-of-sale … activities to Paysafe’s processing division significantly strengthens its ability to provide processing for POS, online, and order-ahead payments, all under a single real-time consolidated analytics platform.”

Paysafe expects the acquisition to close by Sept. 30. Merchants’ Choice chief executive Todd Linden will stay on as an executive with Paysafe’s North American operations. Chief financial officer Giovanni Diano also will join Paysafe.

Meanwhile, publicly-traded Paysafe said the Blackstone-CVC consortium initially approached it in May about a possible deal. At the time, its shares were trading at about 450 pence (£4.50), according to Reuters. Paysafe said it rejected a number of offers, but has agreed to commence due diligence on the offer disclosed Friday of 590 pence per share (£5.90, or $7.69). Paysafe said the proposal represents a 34% premium to its average share price over 2017’s first half.

Paysafe also said its largest shareholder, Old Mutual Global Investors (UK) Ltd., which owns 10.3% of the company, supports the offer. Paysafe said the deal calls for the sale of non-core assets such as its Asia gateway.

The possible acquisition of Paysafe by the two private-equity firms would mark a return to payments by Luxembourg-based CVC, which previously owned Skrill, Reuters reported. Blackstone is headquartered in New York City.