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EML Payments is bolting onto its growing European business with the purchase of Flex-e-Card Limited (FEC), a UK-based fintech that also operates in Ireland, Poland, Italy, Finland and the UAE.
EML's European subsidiary executed a share purchase agreement on 17 May to acquire 100 per cent of FEC for £21.6 million ($40.5 million).
The deal will be funded by around $25.5 million in cash reserves and a further $15 million from a debt facility with a major Australian bank.
FEC is expected to generate at least $4 million in EBTDA in the first year of ownership with no working capital input requirement post-close as the business is cash generative.
Shares in the Brisbane-based company have lifted by 5.3 per cent this morning to $2.17, with CEO Tom Cregan highlighting FEC's revenue metrics and gross margin percentages are very similar to the existing EML business.
"Most of our M&A interest is opportunistic...but in this case it's one that I've worked on for quite a while with the owners of that business but the timing was right to reinstigate that," Cregan said in a teleconference call.
"We've undertaken significant due diligence and are more than comfortable about their future growth goals.
"For those investors that already understand our business pretty well there's not a lot of brain surgery involved in understanding this business. It's very similar financially."
The transaction is expected to be completed on 28 June, giving EML access to the acquired group's gift card solutions for the shopping mall sector with a presence in 226 centres under contract.
This will help boost EML's global leadership in the segment with more than 800 shopping mall gift card programs under management, while also bringing opportunities to new regions where FEC has seen rapid growth including Poland with 74 programs and the UAE with 24.
"The UAE is a very interesting market and one that we've looked at quite a bit," Cregan said.
"Obviously malls themselves are a big business in their own right in the UAE, but the mix of brands and programs within those malls are quite different to what you might normally see in Australia or in fact even in the UK or the EU.
"There are multiple car dealers who have their car dealerships within the malls, and FEC serves gift card programs for those cards as well."
Cregan is optimistic about the growth opportunities in its mall portfolio, particularly in Eastern European markets such as Hungary and the Czech Republic where FEC has put a lot of attention.
"We'll be focusing pretty heavily on the expansion of those B2B sales efforts across the larger portfolio as a means of driving additional growth in the space, and the use of the pay technologies," he said.
"So [for] the use of those same gift card programs but across whether it be Google Pay, Apple Pay or Samsung Pay, implementing those across our combined mall portfolio and then really leveraging that into broader multiprograms for the mall industry. I think that really sums up the basis for the transaction," he said.
Today's announcement follows a deal in February to launch a reloadable winnings card program in Sweden with Betsson, the Scandinavian country's largest gaming group which operates the Betsson, NordicBet and Betsafe brands.
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