Popular buys fintech assets from Evertec for $197M, extends commercial contracts
Popular Inc. announced it has entered into a definitive agreement to acquire assets and assume liabilities used by financial technology company Evertec to service certain Banco Popular de Puerto Rico customer channels. The deal is worth nearly $197 million.
Popular expects the acquisition will accelerate its ongoing digital transformation and continue improving the experience of its clients, it said in a press release. Puerto Rico’s largest banking institution will buy technology services that Evertec currently offers as part of its Business Solutions segment.
The transaction, which is expected to close on or about June 30, 2022, is subject to certain closing conditions. At or after closing, Popular anticipates adding about 175 employees and contractors that support the servicing of the key channels, to boost its in-house technology division.
“The financial technology space is evolving rapidly. The increased expectations to digitize and improve our customer experience requires that we constantly assess and invest in our capabilities,” said Popular Inc. CEO Ignacio Álvarez.
“This transaction will enhance our client experience and allow us greater flexibility to meet our customer demands. Evertec will continue to be a key strategic partner and we look forward to working together to build on our payments strategy,” he said.
Popular will pay for the deal by delivering 4,588,955 shares of Evertec common stock that it holds and are valued at $42.84 per share. After the deal is completed, Popular’s ownership stake in Evertec is expected to be approximately 10.5%, which it will further reduce to below 4.5% by returning stock to shareholders. The expected sell-down or conversion of shares is estimated to be $215 million in after-tax gains, assuming the same value per share, the bank noted.
Upon approval, Evertec will no longer be considered a Popular Inc. subsidiary.
“Once Evertec is no longer considered a ‘subsidiary’ of Popular for purposes of the Bank Holding Company Act, Evertec expects to have increased flexibility to pursue growth through acquisitions,” it stated.
In connection with the closing of the acquisition, Popular and Banco Popular de Puerto Rico will also amend and extend service agreements with Evertec, including information technology and payment processing services, which had an initial term ending in 2025.
These include a 10-year extension of the Merchant Acquiring Independent Sales Organization Agreement, a 5-year extension of the ATH Network Participation Agreement and a 3-year extension of the Master Services Agreement.
The ISO Agreement, which sets Evertec’s merchant acquiring relationship with Banco Popular de Puerto Rico, will now include revenue sharing provisions, Evertec confirmed separately.
The MSA modifications include the elimination of the exclusivity requirement, the inclusion of annual MSA minimums through 2028 and adjustments to the existing Consumer Price Index pricing escalator clause.
“This transaction represents the next step in a multi-year strategy that started back in 2015 of repositioning Evertec as a premier payment player in the region and an essential partner to Banco Popular solidifying our relationship with our largest client,” said Evertec CEO Mac Schuessler.
“With this agreement, we believe we are better positioned to continue to diversify our revenue across both our customers and geographies and we expect to benefit from increased acquisition agility,” he said.
J.P. Morgan Securities LLC is serving as financial advisor to Popular, with Sullivan and Cromwell LLP, Pillsbury Winthrop Shaw Pittman LLP and Pietrantoni Méndez & Alvarez LLC acting as legal advisors.