Shift4's latest acquisition, of the Swiss payments technology firm Global Blue, has perplexed analysts who follow the digital payments processor.
When the Allentown, Pennsylvania-based payment company pursues other companies to buy, it generally targets firms that can help it extend payment processing services to more merchants, according to analysts who cover the company. But Global Blue's merchant customers are already well-served by major payment players.
Shift4 has a solid history of acquisitions, Evercore ISI analyst Adam Frisch said in an interview. "But this one, from a strategic point of view, seems a little off."
Shift4 buys other companies with the intent to access more merchants, Frisch said. "Global Blue offers access to merchants, but via a path which is somewhat unorthodox to how they've done it in the past,” he explained.
The Pennsylvania processor announced in February that it plans to buy Global Blue for an enterprise value — which includes taking on debt — of $2.5 billion. The company announced on Thursday that the merger is complete.
Prior to Thursday’s announcement, Shift4 extended a tender offer to buy all of Global Blue’s outstanding shares five times, according to filings with the Securities and Exchange Commission.
Analysts who follow the company, including Matt Coad of Truist Securities, said the delays were not a reason for concern.
"There are complexities" in international mergers, he said in an interview prior to the merger’s completion. "Swiss regulators are doing more due diligence. Extending the offer isn't a big deal.
Shift4 has a strong plan to make the acquisition work by merging a key tax processing service with its own, Thomas McCrohan, Shift4's executive vice president for investor relations, said in a July interview.
The purchase will be the firm’s largest. The company already operates in Europe, Asia and South America at about 400,000 retail and hospitality locations, but the acquisition will extend its reach. The deal is “a little bit different for (Shift4), but makes sense as they continue to push into international markets,” Gimme Credit Senior Bond Analyst Stu Novick said by email in February.
Some of Shift4's other recent purchases include Smartpay Holdings last month, which operates a distribution network selling payment services to businesses in Australia and New Zealand, and the Canadian firm Eigen Payments last December.
The Smartpay purchase was "another acquisition that will run the Shift4 playbook," RBC Capital Markets analyst Dan Perlin said in a June note to investors.
Shift4 will almost certainly encourage Eigen customers to move to its processing platform, Perlin wrote. Eigen offers point-of-sale and online ordering services and serves a different clientele than Shift4, said Matt Coad, an analyst for Truist Securities, which gives the payment processing company an opportunity to market to Eigen's existing clients.
The payments processor follows a similar strategy with most of its mergers by looking for companies that can help it reach more merchant clients, he said.
That makes the Global Blue acquisition somewhat confounding, because the Swiss company serves higher-end merchants who already work with well-known payment companies like Ayden and Stripe, Coad said.
Global Blue's customers include high-end luxury brands such as Louis Vuitton, Hermes, Valentino, and Prada, said Shift4 President Taylor Lauber in a February Earnings call with investors.
"It's hard to win that payment processing from Adyen and Stripe," Coad said.
While major luxury retailers like Louis Vuitton might not be willing to jump ship, Global Blue also works with smaller luxury retailers, McCrohan said.
"We're not approaching Global Blue thinking that we're going to displace Adyen," he said. "We're approaching them thinking that they have a long tail of single location boutique customers that are reliant on a local bank" for payment processing.
Those retailers might be persuaded to switch thanks to a secret weapon Shift4 will gain in the struggle for merchant clients: a value-added tax refund processing service offered by Global Blue.
Countries like France and Germany charge a value-added tax (VAT) — a complex levy that takes into account various stages in the supply chain that moves a product from the factory floor to the store shelves — on high-end purchases. The U.S. does not charge a value-added tax, which means travelers from this country who buy a product in a foreign nation or have something shipped to the U.S. from a VAT country can have the value of the tax refunded to them.
Few of Shift4's competitors offer VAT refund processing, McCrohan said. It's a “unique and important capability," he said.
