Blackhawk’s Proposed $3.5 Billion Buyout Headed Toward Mid-Year Close

No other bidders emerged during a so-called go-shop period that expired earlier this month, so Blackhawk Network Holdings Inc. reported Tuesday that its planned $3.5 billion buyout by two investment firms remains on track to close at mid-year.

The Pleasanton, Calif.-based provider of gift cards and other prepaid card services did not give a specific date for closing. The deal, in which Blackhawk stockholders will get $45.25 per share in cash and includes assumption of Blackhawk’s debt, still needs shareholder approval and to clear other customary closing conditions.

Blackhawk reported Jan. 16 that private-equity firm Silver Lake Management LLC and hedge fund P2 Capital Partners were offering to take the company private. Their offer included a go-shop period in which the company could solicit or consider other offers until Feb. 9.

An entity identified only as “Party A” indicated some interest about a possible buyout in early January, but never came through with an offer by the end of the go-shop period, according to a regulatory filing from Blackhawk earlier this month. The filing also says Blackhawk’s financial advisor, Sandler O’Neill & Partners L.P., contacted eight “strategic entities”—companies in the prepaid business or related industries—and five additional financial firms that it believed might be interested in bidding. “None of these parties indicated that they were interested in engaging with the company during the go-shop period,” the filing says.

The filing says Silver Lake and P2, which became a Blackhawk shareholder in September 2014, approached Blackhawk in mid-2017 about possibly taking a minority interest in the company to help it fund acquisitions. In October, shortly after Blackhawk reported disappointing third-quarter results and lowered its financial outlook—prompting a 20% drop in its share price—Silver Lake and P2 proposed acquiring the company, the filing says.

For the fourth quarter, Blackhawk posted operating revenues of $942 million, up 21% from $780.6 million a year earlier. Full-year revenues came in at $2.23 billion, a 17% increase from 2016’s $1.9 billion.

Blackhawk reported a $128.2 million loss for the fourth quarter compared with net income of $24.7 million in the year-earlier period. The loss stemmed from one-time charges, including a $125.1 million tax-related write-down. For the year, Blackhawk posted a net loss of $155.8 million versus net income of $4.7 million.

Blackhawk said it sold its Grass Roots meeting-and-events business in December for $45.2 million. The company also plans to divest its struggling Cardpool gift card exchange business this year.