Banc of California, Inc. (NYSE: BANC) (the “Company”), the parent holding company of Banc of California, N.A. (the “Bank”), today announced that the Bank has acquired the payments platform and technology of Global Payroll Gateway, Inc. and its wholly-owned subsidiary, Deepstack Technologies, LLC (collectively, “Deepstack”) for $24 million in cash and stock.
Headquartered in Jupiter, Florida with a team located in Southern California, Deepstack is a differentiated software-led and e-commerce payments platform that provides clients with payment solutions, including merchant processing, payments acceptance and disbursements, tokenization, virtual accounts, fraud protection tools, chargeback management, and reconciliation and reporting services.
The Company will host a conference call to discuss the transaction at 7:00 AM Pacific Time (PT) on Friday, September 16, 2022. Please see below for further conference call details.
Key strategic and financial benefits of the transaction and the development of the payments vertical:
Enables Banc of California to offer a best-in-class, one-stop-shop payments solution and significantly expands the Bank’s addressable market
Adds a high margin source of stable, predictable fee income with the end-to-end solution enabling Banc of California to capture a much larger share of the revenue per transaction than the typical merchant processing of regional banks
Diversifies the Company’s revenue mix while increasing non-interest income as a percentage of revenue
Provides another source of noninterest-bearing deposits
Further differentiates Banc of California from regional bank competitors, enhances business development capabilities in attractive vertical markets, and provides opportunities for expanding relationships with existing clients
Creates another driver of profitable long-term growth and franchise value
The acquisition provides the Bank with a proprietary technology platform for payment processing, offering the full stack of payment services to its clients as a payment gateway, payment provider, and an ISO 8583 payment switch. Through its Deepstack subsidiary, the Bank will market payment processing services to a wide range of business clients, including existing clients, integrated software vendors (“ISVs”), e-commerce marketplaces, fintechs and other merchants who are seeking a convenient and tech-oriented solution to embed payments into their software and websites.
Jared Wolff, President and Chief Executive Officer of the Company, said, “The acquisition of Deepstack expands our business into payment processing and furthers our strategy to grow fee-based income in a scalable and meaningful way. Deepstack’s client-centric technology platform will enable us to offer existing and new clients a best-in-class transaction processing solution. Combined with our existing, leading-edge deposit and treasury management solutions and tailored lending services, we continue to execute on our strategy to be the hub of the financial services ecosystem for our clients and enhance the value of our franchise.”
Jayme Amirie, President of Deepstack, said, “We are excited to join Banc of California and provide a full stack payment solution to clients that very few banks and payment processors are able to offer. ISVs and tech-enabled businesses are tired of piecemeal embedded payments and finance solutions and limited interactions with the underlying bank. By combining with Banc of California, we can offer clients cutting-edge payments technology solutions to enable them to seamlessly integrate and monetize their platforms, while giving clients faster access to funds from credit card receivables, same-day account visibility, and better reporting and account reconciliation.”
Transaction Details
Under the terms of the transaction, the Bank acquired the assets of Deepstack, including but not limited to, the intellectual property and certain clients of Deepstack. The consideration was paid 70% in cash and 30% in the Company’s common stock using the 20 trading-day volume weighted average closing price of $17.46 per share. All of Deepstack’s employees have joined the Bank and its three executives have entered into three-year employment agreements with the Bank. Eight of the eleven employees are based in Southern California. Deepstack Technologies is an operating subsidiary of the Bank and Jayme Amirie will continue as the President of Deepstack.
The transaction is expected to be neutral to consensus earnings per share estimates in 2023 and expected to be accretive thereafter. The transaction is expected to be approximately 2.7% dilutive to tangible book value per share. The transaction includes a three year earn out beginning in 2023 to be paid from operating profits of the new subsidiary.
MJC Partners, LLC served as financial advisor to Banc of California in the transaction, and Paul Hastings LLP served as legal counsel to Banc of California. MAPP Advisors acted as advisor to Deepstack and Global Legal LLP served as legal counsel to Deepstack.