Brazilian credit card processor StoneCo on Tuesday said it would buy software company Linx SA in a 6.04 billion reais ($1.12 billion) stock and cash deal that will transform it into an integrated provider of software and payments.
StoneCo said it is interested in Linx’s 70,000 retail clients, who now process payments with gross transaction volume of 300 billion reais ($55.74 billion) through other providers. The card processor also plans to offer them banking services and credit.
The move comes as card processors face fierce competition in Brazil, with prices under pressure. The acquisition of Linx, which has a partnership with Itau Unibanco Holding SA’s Rede unit, would also provide StoneCo with a new revenue line.
The card processor is offering Linx’s shareholders one newly issued class A preferred share and one newly issued class B preferred share, which is the equivalent of 33.7625 reais for each Linx share.
It represents a 41.6% premium over Linx shares based on their volume-weighted average price of the last 60 days, the companies said. Based on Monday’s closing price, the premium is 29%.
After the deal, Linx will become a new software business unit of StoneCo, managed by executives from both companies.
The deal has a breakup fee of 605 million that Linx would pay StoneCo in case of antitrust problems or a competing offer. If shareholders do not accept the offer, the breakup fee is 25% of that amount.
StoneCo will finance the deal with a $1 billion share offering.
Shares in Linx surged 31.5% after it announced negotiations for a deal in the afternoon, while U.S.-listed StoneCo’s shares gained 11%.
Source: Reuters.com