Internet banking and bill payment vendor Online Resources has signed a definitive agreement to acquire e-payment processor Princeton eCom Corporation for $180 million in cash plus an earnout of up to $10 million.
Founded in 1984, privately-held Princeton eCom is an electronic payments provider to financial institutions and billers.
Based on its first quarter 2006 revenue results, which is up over 25% from the prior year, Princeton eCom has an annual run-rate of approximately $39 million in revenue. Margin on earnings before interest, taxes, depreciation and amortization (Ebitda) was 12%.
Online Resources says the acquisition will allow it to by-pass years of business development.
Matthew Lawlor, chairman and chief executive officer of Online Resources, adds: "By consolidating our consumer service provider (CSP) platforms, we gain significant distribution and economies of scale in serving the financial institution market with our pay anyone service.
"Second, we gain a solid business and management team in the biller service provider (BSP) market, enabling us to jump-start our strategic real-time payments initiative. Together, these capabilities make us a major force in Web-based payments."
Following the merger, the combined company expects to process over 200 million transactions representing $75 billion in bill payments over the next year and will serve 2200 financial institutions and 1600 billers.
Lawlor says expected cost synergies will make the acquisition accretive to core net income per share at the end of 12 months.
Following the acquisition, Ronald Averett, Princeton eCom's chief executive officer, will head the combined companies' e-commerce business, including Princeton eCom's bill payment services and Online Resources' card, credit and real-time payments services.
The purchase price will be funded from cash on hand and financing provided by Tennenbaum Capital Partners. At closing of the transaction, Tennenbaum will make a total investment of $160 million in Online Resources in a cash and stock deal. Tennenbaum will hold about a 14% stake in the merged company and take a seat on the board when the deal closes.
The transaction is expected to close by 15 July 2006.