Dive Brief:
- Digital payment services provider Repay Holdings proposed paying $372 million last month to acquire Kubra Data Transfer, but a major shareholder, investment firm Veradace Partners, voiced opposition to the acquisition on Thursday in a public letter attached to a press release. Veradace, which owns an 8.4% stake in Repay, contended other shareholders also oppose the deal.
- In the letter to Repay’s board of directors, Veradace advised the board to abandon the transaction, add two shareholders to the board and investigate how the company decided to pursue the Kubra purchase. The shareholder said one director, who wasn’t named, was unaware of shareholder dissent expressed to management.
- ”The Board should act with haste to collaborate with shareholders to resolve governance issues and stop a deal that is much lower return and much higher risk than other capital allocation alternatives,” the April 9 letter said.
Dive Insight:
The publicly-traded Repay provides bill payment processing software services to commercial clients in an array of industries. The company said March 30 that it had agreed to pay cash and use debt financing to make the acquisition of Kubra, which provides similar services with a utility and government client niche.
Repay argued in a press release announcing the deal that the combination would strengthen two complementary businesses by merging Repay’s payment technology platform with Kubra’s verticals, partnerships and market approach. The combined company would have had about $548 million in annual revenue last year and adjusted earnings before interest, taxes, depreciation, and amortization of about $178 million, the Repay release said.
Veradace argues that shareholders believe the company’s capital could be used more effectively in other ways.
“There is strong opposition at this time to M&A given RPAY’s depressed valuation and alternative capital allocation options, and even stronger dissatisfaction with the size, valuation and leverage of KUBRA specifically,” the shareholder argued in its letter.
Repay’s stock has dropped by about a third over the past year to $2.94 on Friday.
A spokesperson for Repay didn’t immediately respond to a request for comment.
