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ATM outfit DirectCash to buy Australia's Customers for A$173 million

02 April 2012  |  1154 views  |  0 Source: DirectCash

DirectCash Payments Inc. (TSX:DCI) ("DirectCash") is pleased to announce it has entered into an agreement (the "Scheme Implementation Deed" or "SID") with Customers Limited (ASX:CUS) ("Customers") whereby DirectCash has agreed to acquire all of the outstanding shares of Customers for A$1.27 per share in cash.

The total consideration for the purchase of 100% of the fully diluted shares of Customers is approximately A$173 million. At signing of SID, Customers will have A$37 million in outstanding debt.

The transaction, which has been unanimously approved by the Board of Directors of DirectCash, will create a leading global branded ATM provider with principal operations in Canada and Australia. The Customers Board of Directors unanimously recommends that Customers' shareholders vote in favor of the Scheme, in the absence of a superior proposal and subject to DirectCash obtaining committed funding and an Independent Expert's Report concluding that the Scheme is in the best interests of Customers' shareholders.

The acquisition will be implemented through a court-approved Scheme of Arrangement under Australian law (the "Scheme") and is subject to the approval of Customers' shareholders, relevant court approvals and certain closing conditions contained within the SID.

The transaction is expected to close early in the third quarter of calendar year 2012 and is expected to be significantly accretive to DirectCash's funds from operations per share in the first fiscal year following the transaction. DirectCash expects to fund the transaction through a combination of debt and equity financing.

The Combined Entity:

Since inception, Customers has created a strong profitable network of ATMs, with a leading market presence in Australia and a growing ATM business in New Zealand. The Australian ATM market is less saturated than the Canadian market and as a result Customers' ATMs produce higher transaction volumes than the average ATM in Canada. Through this acquisition DirectCash will achieve a leading position in the Australian ATM market, where Direct Cash currently has existing operations in the prep aid cash cardline of business.

As a result of the acquisition of Customers, a total of approximately 6,300 ATM sites and related contracts will be acquired by DirectCash by DirectCash in Australia and New Zealand. The acquisition of these ATM contracts will bring the total number of DirectCash ATM active sites/contracts to approximately 14,200. The acquisition of Customers adds approximately C$129 million in revenues and C$39 million in EBITDA, based on the last twelve month period ending December 31, 2011. Following the close of the transaction, Customers will become a new division of DirectCash.

In addition, DirectCash will become one of the largest, publicly traded, branded ATM providers in the world with operations in Canada, Australia, New Zealand, Mexico, the United Kingdom and the United States.

Management Commentary:

Jeffrey Smith, DirectCash's President and Chief Executive Officer said, "We are very excited about this acquisition as it gives us a significant ATM market presence in Australia. Customers is an exceptional ATM operator in Australia with quality contracts in place with its customers. We are excited to have the opportunity to add the Customers business to our operations, and continue to build our presence internationally".

Acquisition Highlights:

Unique Opportunity to Significantly Grow DirectCash's Core ATM Business

-- Adds approximately 6,300 ATM sites, with pro forma total of 14,200
-- Post the acquisition, DirectCash will have operations in six countries,
including, Canada, Australia, New Zealand, Mexico, the United Kingdom
and the United States


Attractive Financial Metrics

-- Significant expected accretion to funds from operations per share in the
first fiscal year following the transaction


High Growth Potential

-- Provides a platform for growth throughout Asia Pacific, including the
existing Customers initiative into New Zealand
-- Opportunity to grow the Customers ATM business platform in Australia and
capitalize on the less mature Australian market


Transaction Details

The transaction is conditional upon Customers' shareholder and Australian Court approval (as is required pursuant to the statutory scheme of arrangement process) and the Independent Expert concluding that the Scheme is in the best interests of Customers shareholders.

Completion of the transaction is also conditional on DirectCash securing sufficient funding. Under the terms of the SID, DirectCash has until April 27, 2012 to deliver a binding commitment from a financial institution to provide sufficient funding for DirectCash to perform its obligation with respect of the Scheme (the "Binding Commitment"). Should DirectCash fail to deliver the Binding Commitment by April 27, 2012, or should Customers terminate the SID for a DirectCash material breach, DirectCash will pay Customers a reverse break fee of A$500,000.

The SID includes a commitment by Customers not to solicit alternative proposals to this transaction and other exclusivity and confidentiality obligations on Customers. Specifically, the SID includes a requirement to notify DirectCash of competing transactions or approaches by third parties and provides DirectCash with a right to match any superior proposal received by the Customers Board. Customers' exclusivity obligations are qualified by their directors' fiduciary duties.

Prior to DirectCash's delivery of the Binding Commitment, if the Customers Board of Directors recommends a superior proposal that is not matched by DirectCash, a break fee of A$500,000 will be payable to DirectCash. After DirectCash has delivered the Binding Commitment, the occurrence of certain events (including any Customers Director recommending a competing transaction or DirectCash terminating the SID for a Customers material breach) will trigger a break fee payable by Customers of A$1.7 million.

A full copy of the SID with full details of all conditions precedent and the obligations and restrictions of both parties will be filed in accordance with applicable securities laws and will be found on the DirectCash profile on SEDAR at www.sedar.com. A copy will also be released to the ASX (and will therefore be available at www.asx.com.au).

Next Steps and Timetable

The Transaction is conditional upon approval by a simple majority of Customers' shareholders present in person or by proxy at the Scheme meeting (a headcount test) and by at least 75% of the votes cast at that Scheme meeting. The meeting for Customers' shareholders to vote on the Transaction is expected to be held in June 2012.

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