News

Australia's Cashcard grows with purchase of EBS

October 9, 2002

SYDNEY -- Gresham Partners' private equity unit will emerge with the single largest share in payments switch and ATM deployer Cashcard, thanks to controlling shareholder St George Bankcutting its stake to less than 10 percent, according to a report in The Age.

In a complex transaction that will include Cashcard's purchase of rival deployer Electronic Banking Solutions, the combined entity will be valued at $138 million Australian (about $75.5 million U.S.). St George will make more than $26 million ($14.2 million U.S.).

Cashcard is also expected to seek a stock market listing in the next two years, according to The Age.

St George will relinquish its effective control of Cashcard once the deal is finalized in mid-October. The bank's 49 per cent share in Cashcard is valued in the bank's accounts at $6 million (about $3.3 million U.S.). St George will sell most of its stake for $24 million ($13.1 million U.S.) in cash, by selling some shares to Gresham and some to other shareholders, while Cashcard will buy back and cancel up to eight million shares. St George will retain about 6 percent.

St George is selling its shares for an average price of $1.42 (77 cents U.S.). Gresham is paying St George $1.65 a share, while other shareholders will pay $1.57.

Cashcard will buy back shares at between 33 cents and $1.14, for a total outlay of between $1 million ($547,300) and $9 million ($4.9 million U.S.), depending on the willingness of other shareholders to buy shares from St George.

The transaction values Cashcard before it takes over EBS at $61 million ($33.4 million U.S.), and EBS at $40 million ($21.9 million U.S.).

The deal values EBS, at the retail end of the ATM market, at more than 2.5 times revenues, and Cashcard, more a wholesaler, at less than 1.5 times revenues.

Shareholders in Cashcard are expected to control 71 per cent of the new entity and shareholders in EBS 29 per cent. EBS shareholders may also be paid a further $14 million ($7.6 million U.S.) in cash in the period to June 2003 under an earn-out clause.

About a quarter of Cashcard's staff of 200 are expected to lose their jobs as the new company seeks deep cost cuts from overlapping businesses, according to The Age.

Cashcard in March was awarded an exchange settlement account with Australia's Payment System Board, positioning it as the first independent to settle payments directly rather than through a financial institution. (See related story Independents making headway in Oz)