It was a very rewarding trading day for investors in VeriFone Systems (NYSE:PAY) with shares up over 50%, making the stock Wall Street’s bull of the day. Why the excitement? VeriFone announced yesterday after the market close that it had agreed to be taken-over by an investor group led by private equity firm Francisco Partners for $23.04 per share in cash, which represented a 54% premium over PAY’s share price at the close of yesterday’s trading.
Commenting on the acquisition, Verifone CEO Paul Galant said, “We are pleased to reach this agreement with Francisco Partners. This transaction delivers significant cash value to our stockholders and provides compelling benefits for our clients. We believe this transaction reflects the progress we have made executing our transformation from a terminal sales company to a payments and commerce solutions provider. With Francisco Partners’ resources, expertise and track-record growing global technology businesses, we are confident that we will be better positioned to serve the needs of our clients around the globe.”
BTIG’s Mark Palmer believes the deal is a surprisingly good one for PAY shareholders, particularly in light of the volatility of the company’s operating results during the past couple of years and the uncertainty that still surrounds its efforts to execute its strategy of deploying new devices across global markets while building out its Services platform.
While Francisco Partners clearly believes in PAY’s ability to transform itself from a seller of payment terminals to a payments and commerce solutions provider, Palmer believes the large premium and the multiple implied by the private equity firm’s offer is quite full in light of the “show me” nature of the PAY story and the rapidly changing environment in the point-of-sale payment terminal arena. As such, Palmer points out that it is unlikely that any other suitors are likely to emerge with a higher bid.
Wall Street analysts are not convinced that VeriFone is worth the risk at this point, especially when taking note that TipRanks analytics exhibit PAY as a Hold. Based on four analysts polled in the last 3 months, all four issue a Hold on the stock. The 12-month average price target stands at $23.02, marking a slight upside from today’s closing price.