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Prepaid card solutions provider EML Payments (ASX: EML) have skyrocketed by more than 60 per cent today following a drastic renegotiation of its largest acquisition to date.
The Brisbane-based company had previously reached a deal to buy Prepaid Financial Services (Ireland) Limited (PFS) for £226 million (A$453.2 million), but the impacts of lockdowns in Spain and France have cast a shadow over the target company.
There is also a great deal of uncertainty about how fintechs will weather the economic storm ahead compared to traditional banks that have overcome - or been bailed out from - financial crises in the past.
These factors allowed EML to score a massive £94.5 million (AUD$189 million) discount on the purchase price, which has been brought down to £131.5 million (AUD$263.5 million).
The earn-out arrangement worth up to £55 million (A$103 million) remains unchanged.
"The Board of EML was committed to seeking a conclusion to the transaction, but on improved terms reflecting the economic reality of Covid-19 and the need to have a strong balance sheet with significant cash on hand and nil net debt," said EML, which is led by CEO Tom Cregan (pictured).
"The parties have worked collegially to re-structure the transaction in order to best position the go-forward combined business.
"EML would like to thank PFS's selling shareholders for the spirit in which these negotiations have occurred and their commitment to the future strength and growth of the combined organisation, which they will be a part of as shareholders of EML."
PFS' unaudited financial results for the calendar year ending 31 December 2019 were ahead of EML's expectations with gross debit volume $3.01 billion, up 53 per cent on the prior year.
For the first two months of this year the group has actually been performing at the upper end of EML's initial acquisition case, delivering GDV of £510.5 million (AUD$1 billion) or an annualised run rate of approximately £3.1 billion (AUD$6.2 billion).
While today's percentage rise is significant, it is still not even half the value of EML shares in mid-February.
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