EML Payments Announces its Acquisition of Sentenial
- EML Payments and Sentenial have entered into a binding Share Purchase Agreement
- The main object of the deal is to acquire Sentenial's Open Banking technology
- Acquisition to be completed in late FY21
EML Payments (ASX:EML) announced on 7 April 2021 that it has entered into a binding share purchase agreement to acquire 100 per cent of Sentenial Limited as well as its wholly-owned subsidiaries. This transaction's upfront cost will be $108.6 million in addition there will be an earn-out component of $62.1 million
Sentenial is a company that was founded in 2003. It started as a technology platform designed to facilitate account-to-account (A2A) payments across the United Kingdom and Europe. Sentenial counts several major banks among their clients, including Barclays, Lloyds and Citibank, and offer them a range of bank-grade payment solutions for direct debit, credit transfers, and instant payments. In 2020, Sentenial handled a volume of more than €45 billion in transactions.
One of Sentenial's subsidiaries, Nuapay, is also included in the transaction. Nuapay is an open banking platform that also incorporates Sentenial's A2A capabilities. In 2020, Nuapay processed more than €700 million in transactions. This product has now connected to over 1750 banks and institutions over Europe. It should be noted that the earn-out component of the acquisition is contingent on Nuapay achieving a target revenue of €30 million in 2023.
The upfront cost of the transaction will be funded partially through a combination of cash on hand to a value of $60.3 million. The remaining $48.2 million will be financed through an issue of new EML stocks to be offered to Vendors at the 10-day Value Weighted Average Price to the date this agreement was signed. This equates to approximately 9.6 million shares or 2.9 per cent of issued EML shares. Around 60 per cent of the shares will be subject to a 6-month restriction from sale.
Also worth noting is that the $62.1 million earn-out component is contingent on Sentenial's subsidiary Nuapay achieving a target revenue of $41.9 million in the 12 month period ending on 31 December 2023. The earn-out will be paid in cash or equity at EML's discretion in 2024.
EML intends to add the Open Banking capabilities of Sentinial to its suite of solutions and plans to take the opportunity to cross-sell Nuapay Open Banking Solutions into their own suite of payment solutions. They state that this acquisition will distinguish them as one of the largest Financial Technology Enablers in Open Banking and Prepaid globally.
The company also notes that the acquired technology will be highly scalable and has been thoroughly future-proofed through constant investment. This will allow for fast deployment and rapid growth, and EML has explicitly stated that it now has plans to export the platform into Australian and North American markets. The acquisition is on track to be complete in late FY21, subject to regulatory approval.