Gift and prepaid card services provider Blackhawk Network Holdings Inc. reported Tuesday that it has a deal with two financial firms to be taken private for $3.5 billion.
Private-equity firm Silver Lake Management L.L.C. and hedge fund P2 Capital Partners are offering $45.25 per share in cash. The offer represents a 24% premium over Blackhawk’s closing share price of $36.50 on Jan. 12 and a 29.3% premium over the average closing share price during the 90 calendar days ended Jan. 12, Blackhawk said.
Pleasanton, Calif.-based Blackhawk said in a news release that its board of directors has approved the transaction, which it expects to close at mid-year, and that its existing management team will remain in place. The pending deal, however, permits the board to solicit or evaluate other offers until Feb. 9. A Blackhawk spokesperson was unavailable for comment Tuesday morning on how the deal came together.
“This transaction delivers immediate benefits and significant value to our stockholders,” Talbott Roche, Blackhawk’s president and chief executive, said in a statement. “Silver Lake and P2 Capital Partners bring the long-term focus, financial resources and technology expertise that can enable us to accelerate growth initiatives globally and reach the company’s full potential.”
Silver Lake is no stranger to payments—it was an investor in the big independent sales organization Mercury Payment Systems, which processor Vantiv Inc. acquired in 2014. Silver Lake has three offices in Silicon Valley and one in New York.
“Blackhawk’s outstanding network of partners and proprietary technology creates a unique franchise in the payments industry with a proven ability to innovate in both the physical and digital segments,” Mike Bingle, managing partner at Silver Lake, said in the release. “We are excited to work with Blackhawk’s world-class management team and our new partners at P2 Capital Partners to strengthen the company’s position in large and growing parts of the financial technology ecosystem.”
New York City-based P2Capital Partners beneficially owns 5.4% of Blackhawk. The deal includes the assumption of Blackhawk’s debt and $1.7 billion in equity from Silver Lake.
Blackhawk, which is best known for its gift card racks in grocery stores and other retail locations, reported operating revenues of $419.3 million in 2017’s third quarter, up 16% from a year earlier, but a loss of $7.8 million. How Blackhawk will fare under private ownership is hard to predict, but financial support from its buyout partners could help it stay competitive as the prepaid market rapidly evolves.
“Blackhawk is one of the largest third-party gift card distribution companies and as such plays a critical role as a market maker for connecting issuers of prepaid cards and prepaid digital assets with the outlets where these assets are purchased, which includes merchant locations such as supermarkets, online locations such as Amazon, and banks and incentive suppliers that purchase prepaid cards in bulk,” Tim Sloan, vice president of payments innovation at Maynard, Mass.-based Mercator Advisory Group Inc. tells Digital Transactions News by email. “The market for prepaid gift cards has matured, but continues to grow at a slower pace and has trended towards open-loop cards as retailers have announced store closings.”
Sloane also notes that Blackhawk’s primary competitor is Atlanta-based InComm, “which has been active in establishing a more diverse set of products, including cash in at the [point of-sale] for utilities and communications companies, and active participation in prepaid mobile SIM chips.”
Last August, American Express Co. announced that it was selling its Serve technology platform and the distribution rights to AmEx-branded general-purpose reloadable prepaid and gift card products in the U.S. to InComm.