28 Oct 2013 15:33 ET
Marketwire Canada - NFD Not for distribution to U.S. news wire services or dissemination in the United States. DirectCash Payments Inc. (TSX:DCI) ("DirectCash" or the "Corporation") today announced that it has negotiated the following. -- Share purchase agreement for the strategic acquisition of Threshold Financial Technologies Inc. ("Threshold"), a business operating Credit Union and Financial Institution transaction processing services, ATM outsourcing and their own 1,475 ATMs in Canada -- Amendment to its existing Credit Agreement to provide greater operational flexibility -- $15 million bought deal equity financing -- A Canadian vault cash rental agreement for ATM cash supply with a major Canadian financial institution DirectCash has today signed a share purchase agreement with Brink's Canada Limited, a subsidiary of The Brink's Company, to acquire all of the issued and outstanding shares of Threshold, a business operating credit union and financial institution transaction processing services, ATM outsourcing and its own ATMs in Canada, for $50 million, subject to certain customary closing purchase price adjustments (the "Acquisition"). Threshold's operations add a highly strategic, complementary business in the payments processing space that is expected to be accretive on a cash flow per share basis to DirectCash shareholders in the first full year following the transaction. The Board of Directors of DirectCash has unanimously approved the Acquisition and the parties are working towards closing the transaction on November 1, 2013. The closing date may be adjusted by the parties in accordance with the terms of the share purchase agreement and the status of the conditions precedent to closing set out therein. In order to increase its ongoing operational and financial flexibility, in conjunction with the transaction, DirectCash has negotiated with its lending syndicate to amend its existing Credit Agreement and has negotiated terms of a Canadian vault cash rental agreement for ATM cash supply with a major Canadian financial institution. DirectCash believes the integration of Threshold's core credit union and financial institution business will strengthen its strategic position in the payments business and position DirectCash as one of Canada's leading independent providers of end-to-end transaction processing and payment solutions. In addition, the transaction adds an additional 1,475 ATMs to the DirectCash network in Canada. Jeffrey Smith, DirectCash's President and Chief Executive Officer said, "we are very excited about this acquisition as it will bolster our core ATM business in Canada and gives us a significant presence in the highly strategic credit union and financial institution ATM and payments processing services segment. Threshold is a very high-quality operator with attractive contracts in place, a top-tier customer base and good management. We believe that the credit union and financial institution business will strategically position the Corporation within the Canadian payments space as a leading end-to-end transaction processing provider." About Threshold Threshold is a full service integrated solution provider of comprehensive and innovative payments processing and ATM managed services solutions. Threshold specializes in ATM network management and the provision of payments processing services to credit unions, financial institutions and major retailers across Canada. Threshold has two primary business segments, one that caters to credit unions and other financial institutions (the "CUFI Business") and a non-bank ATM business (the "Non-Bank ATM Business"). About the CUFI Business: Threshold provides switch and transaction processing services and other managed services to credit unions and financial institutions across Canada. The end-to-end payment solutions provided by Threshold to the credit unions and financial institutions enables those credit unions and financial institutions to outsource their debit and ATM card processing and compete with services similar to those offered by larger banks. The CUFI Business services are broadly comprised of transaction switching services, card provisioning, payments processing, reporting and settlement, fraud management, ATM Cash Management, ATM Fleet Management and project-based consulting services. About the Non-Bank ATM Business: The Non-Bank ATM Business of Threshold consists of approximately 1,475 retail non-bank ATMs owned and operated under the "LaserCash" brand as well as ATMs managed on behalf of gaming and major retail clients in Canada. Threshold entered the Canadian payments industry in 1998, and has proven itself as a center of excellence in delivering a wide array of best-in-class payments and ATM solutions. In addition to providing managed solutions, Threshold owns and operates a nationwide private label ATM network. Additionally, Threshold operates THE EXCHANGE(R) network in Canada, a shared surcharge-free ATM network comprised of over 200 financial institutions. Acquisition Highlights Addition of a highly strategic complementary business with long-term contractual relationships -- Threshold's CUFI Business enhances DirectCash's core ATM and payments processing business and provides an opportunity for DirectCash to diversify its business mix within the payments processing space -- Threshold has long-term and long-standing contractual relationships with over 70 Canadian credit union and financial institution customers -- Significant intellectual property portfolio of payments processing technologies Attractive opportunity to grow DirectCash's core ATM business in Canada -- Adds approx. 1,475 retail non-bank ATMs and approx. 1,100 financial institution ATMs -- Processes over 300 million transactions annually -- Enhances DirectCash's team with the addition of Threshold's strong operator capabilities Financially attractive to DirectCash -- Expected to be accretive to DirectCash's cash flow per share in the first full year following the acquisition -- Provides incremental operational leverage -- Contractual nature of the CUFI Business provides predictable cash flow streams The Acquisition will be funded through borrowing under DirectCash's existing revolving credit facility. Amendments to Credit Agreement In conjunction with the Acquisition, DirectCash has negotiated the terms of a series of amendments to its existing credit agreement (the "Credit Agreement Amendment"). The proposed Credit Agreement Amendment is anticipated to provide DirectCash with additional operational flexibility and to facilitate the proposed Acquisition. Pursuant to the proposed Credit Agreement Amendment, DirectCash will be required to comply with the following financial covenants, set forth below. ---------------------------------------------------------------------------- Covenant Required Level ---------------------------------------------------------------------------- Senior Secured Debt Leverage Covenant less than or equal to 2.25x(i) (i) Steps down to 2.0x January 1, 2016. ---------------------------------------------------------------------------- Total Debt Leverage Covenant less than or equal to 3.5x ---------------------------------------------------------------------------- Fixed Charge Coverage Ratio greater than or equal to 1.25x(i) (i) Steps up to 1.35x January 1, 2015. ---------------------------------------------------------------------------- The Credit Agreement Amendment has received the necessary approvals from the lending syndicate and remains subject to execution by the parties of final documentation which is expected to take place prior to the end of November 2013. Bought Deal Financing DirectCash has entered into an agreement to sell to a syndicate of underwriters (the "Underwriters") led by BMO Capital Markets, on a bought deal basis, 950,000 common shares (the "Common Shares") to be issued at a price of $16.00 per share for gross proceeds of $15,200,000 (the "Financing"). The net proceeds of the offering will be used by the Corporation to repay indebtedness. The Common Shares will be offered by way of a short-form prospectus in all provinces of Canada, excluding Quebec, and such other jurisdictions as DirectCash and the Underwriters may agree. Closing of this Financing is expected to occur on or about November 15, 2013, subject to certain conditions including, without limitation, the receipt of all necessary regulatory approvals including the approval of the Toronto Stock Exchange. |