Payments technology vendor Hypercom has begun talks with Thales to acquire its e-Transactions business division for $120 million plus an additional performance related earn-out of up to $30 million. Separately, Hypercom has made several new board appointments and promoted Philippe Tartavull to president and CEO of the company, replacing William Keiper who resigned in July.
Thales' e-Transactions business provides secure card payment solutions in France, Germany, the United Kingdom, Spain, Belgium and Sweden and is currently a profitable business line of Thales Group's Security Solutions & Services Division, with unaudited proforma, consolidated revenues for the first three quarters of 2007 of EUR104 million. The proposed business combination would represent the third largest global provider of electronic payment solutions and services.
The companies have proposed a share purchase agreement wherein Hypercom would purchase the e-Transaction business line of Thales for $120 million in cash with a potential earn out of up to an additional $30 million based upon the combined companies' performance in 2008. Hypercom provided Thales with a binding offer on these terms.
Hypercom plans to finance the transaction with $60 million of the company's existing cash on hand, combined with a $60 million investment from Francisco Partners. Under the terms of this financing, Francisco Partners would provide a senior credit facility of $60 million and be granted a warrant to purchase approximately 10.544 million shares of Hypercom common stock at $5.00 per share.
The proposed transaction will be submitted to the Thales' Works Council employee representative bodies before a definitive agreement is signed.
Separately, Philippe Tartavull has been promoted to CEO and president of Hypercom, effective immediately, and has been appointed to the board of directors. He was previously president and COO of the company, a position he assumed when previous CEO William Keiper stepped down in July.
"The e-Transactions business line of Thales is focused on high security electronic transaction solutions and is complementary in many ways, providing additional revenue with cost and technology synergies which we believe is a financially and operationally compelling combination," said Tartavull. "The combination is expected to considerably strengthen our footprint in Western Europe, provide additional talented people to our global team, increase our economies of scale, deepen and diversify or R&D efforts, all of which would allow us to more quickly build market share while driving significant operating margin improvement."
In other board level changes, Norman Stout has been elected chairman of the board, replacing Daniel D. Diethelm who will remain as a member of the board.
Johann Dreyer, CEO and director of S1 Corporation, has also been appointed to the Hypercom board of directors, bringing the total number of directors to six.
Upon the closing of the intended acquisition of the e-Transactions business line of Thales, Keith Geeslin, partner of Francisco Partners, and Jack McDonnell, Jr., retired chairman, CEO and founder of TNS, are expected to be appointed to the Hypercom board.