Online Resources Corporation, a leading provider of Internet financial services, today announced a definitive agreement to acquire Princeton eCom Corporation for $180 million cash with an earnout of up to $10 million.
Princeton eCom is an electronic payments provider to financial institutions and billers. Coupled with Online Resources? bill payments business, the combined company expects to process over 200 million transactions representing $75 billion in bill payments over the next year. The combined company will serve 2200 financial institutions and 1600 billers, more clients than any other bill payment processor.
?Princeton eCom provides us with a single transforming opportunity that leapfrogs years of business development to achieve our strategic goals,? stated Matthew P. Lawlor, chairman and chief executive officer of Online Resources.
?First, by consolidating our consumer service provider (CSP) platforms, we gain significant distribution and economies of scale in serving the financial institution market with our pay anyone service. Second, we gain a solid business and management team in the biller service provider (BSP) market, enabling us to jump-start our strategic real-time payments initiative. Together, these capabilities make us a major force in web-based payments.?
Lawlor added, ?Both firms enjoy a similar, high visibility business model, where recurring user fees are leveraged over relatively fixed costs. Both firms are also growing rapidly and are at a high point of earnings leveragability. We expect the cost synergies will make the acquisition accretive to core net income per share at the end of 12 months, which alone justifies the combination. The compelling reason for the acquisition, however, is to capitalize on significant strategic and revenue opportunities.?
Ronald W. Averett, Princeton eCom?s chief executive officer, will head the combined companies? e-commerce business, including Princeton eCom?s BSP and Online Resources? card, credit and real-time payments services.
Averett stated, ?Online Resources is a first class organization with a track record of executing well and delivering on its promises. The integration plan is straightforward and will deliver significant product and scale benefits to our combined clients and partners. The Princeton management team is excited and committed to making the combination achieve its potential.?
Financial Highlights and Business Outlook
Based on its first quarter 2006 revenue results, which is up over 25 percent from the prior year, Princeton eCom has an annual run-rate of approximately $39 million in revenue. Margin on earnings before interest, taxes, depreciation and amortization (Ebitda) was 12 percent.
Online Resources expects that the acquisition of Princeton eCom will become accretive to core earnings per share, a non-GAAP measure, at the end of 12 months and neutral to slightly accretive to full year 2007 core earnings per share. Online Resources will provide revised 2006 guidance that includes the acquisition of Princeton eCom after the closing of the transaction, which is expected by July 15, 2006.
The purchase price will be funded from cash on hand and financing provided by Tennenbaum Capital Partners, LLC. At closing of the transaction, Tennenbaum will make a total investment of $160 million in Online Resources consisting of $75 million in preferred stock convertible to common at a 25 percent premium to market and $85 million in senior secured notes. On an ?as converted? basis, Tennenbaum will hold the equivalent of 4.6 million shares of common stock, or approximately 14 percent of shares on a fully-diluted basis. The Company will appoint a Tennenbaum partner to join its Board of Directors.
Lehman Brothers Inc. advised Online Resources on the transaction and acted as exclusive placement agent on the financing. Lane, Berry & Co. advised Princeton eCom.
