EML Payments to sell unprofitable Sentenial business for $54.1 million

EML Payments to sell unprofitable Sentenial business for $54.1 million

Photo: Nuapay, via Facebook.

Brisbane-based prepaid card solutions group EML Payments (ASX: EML) has entered an agreement to offload its Sentenial business in Europe to London-headquartered GoCardless for €32.75 million ($54.1 million), representing a price that is less than half of what it paid for the acquisition in 2021

The sale also includes a potential downward price adjustment capped at €7.5 million ($12.4 million) linked to key ongoing contract performance in the lead-up to the transaction, as well as an earn-out from new contracts signed between 1 February and 30 days after completion.

Sentenial also includes the open banking brand Nuapay, and has nothing to do with the PFS Card Services business that has been a thorn in EML's side since May 2021 when the then-recent acquisition was placed under the microscope of Irish regulators around its anti-money laundering provisions and control framework, with implications for operations across Europe.

In January this year EML decided to wind down PFS Card Services and flagged a potential sale of Sentenial, a business it had agreed to buy just one month before its first major European acquisition, PFS, became embroiled in a regulatory quagmire.

Despite the challenges in 2021 with the integration and regulatory compliance of PFS, EML had pressed ahead with its other European acquisition of Sentenial, attracted to its customer base across banking, corporate and software industries, including four of the UK's top seven banks and some of the largest merchant acquirers in Europe.

The Sentenial deal involved a mix of cash and shares with the transaction completed in September 2021. EML's CEO at the time, Tom Cregan, aimed to take its platform to Australian and North American markets.

A few years later and the Sentenial business is set to deliver a $2 million EBITDA loss in FY24, with the business now deemed non-core by the group's board with "no material product or customer overlap with other EML group business lines".

The EML board believes the sale allows the group to simplify its organisational structure while providing additional funds to strengthen the balance sheet.

The sale is also subject to approval from the French and United Kingdom financial regulators, L'Autorité de contrôle prudentiel et de résolution and the Financial Conduct Authority respectively, which are presently expected to be completed within three to six months.

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