PayPoint plc (LON:PAY) today announced that it will acquire the entire issued and to be issued share capital of Appreciate Group.

Under the terms of the Acquisition, Appreciate Group Shareholders will be entitled to receive for each Appreciate Group Share 33 pence in cash and 0.0190 new PayPoint shares.

Each Appreciate Group Shareholder will also be entitled to receive and retain a dividend of up to 0.8 pence per Appreciate Group Share which is declared by the board of Appreciate Group and paid in respect of the six-month period ended 30 September 2022.

Based on the Closing Price of a PayPoint Share of 580 pence on 4 November 2022, being the last Business Day prior to the date of this Announcement, the Acquisition values each Appreciate Group Share at 44 pence and the entire issued and to be issued ordinary share capital of Appreciate Group at approximately £83 million on a fully diluted basis.

This represents a premium of approximately 68.95 to the Closing Price of 26.05 pence per Appreciate Group Share on the Latest Practicable Date; and 63.8% to the volume weighted average price of 26.86 pence per Appreciate Group Share for the three-month period ended on the Latest Practicable Date.

The Acquisition, based on the price of 580 pence per PayPoint Share on the Latest Practicable Date, implies an enterprise value multiple of approximately 6.2x Appreciate Group’s Adjusted EBITDA for the year ended 31 March 2022.

Immediately following completion of the Acquisition, existing PayPoint Shareholders will hold approximately 95% and Appreciate Group Shareholders will hold approximately 5% of the enlarged issued share capital of PayPoint.

The Appreciate Group Directors, who have been so advised by Liberum and Herax Partners as to the financial terms of the Acquisition, unanimously consider the terms of the Acquisition to be fair and reasonable.

Accordingly, the Appreciate Group Directors intend to recommend unanimously that Appreciate Group Shareholders vote in favour of the Scheme at the Court Meeting and in favour of the Resolution to be proposed at the General Meeting as they have irrevocably undertaken to do in respect of their own beneficial holdings which are under their control totalling, in aggregate, 101,413 Appreciate Group Shares, representing approximately 0.1% of the issued ordinary share capital of Appreciate Group as at the Latest Practicable Date.

It is intended that the Acquisition will be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006. However, PayPoint reserves the right to elect, subject to the terms of the Co-operation Agreement and with the consent of the Panel, to implement the Acquisition by way of a Takeover Offer.

The terms of the Acquisition will be put to Appreciate Group Shareholders at the Court Meeting and at the General Meeting. In order to become Effective, the Scheme must be approved by a majority in number of Appreciate Group Shareholders present and voting at the Court Meeting, either in person or by proxy, representing at least 75% of the voting rights attaching to the Scheme Shares voted by such Appreciate Group Shareholders (or the relevant class or classes thereof).

In addition, at the General Meeting to implement the Scheme, a special resolution to approve all actions necessary for carrying the Scheme into effect and the adoption of the Amended Appreciate Group Articles must be passed by Appreciate Group Shareholders representing at least 75% of the votes cast on that resolution.

Commenting on the Acquisition, Nick Wiles, Chief Executive of PayPoint, said:

“The PayPoint Board believe the proposed acquisition of Appreciate Group provides a compelling opportunity to acquire a highly complementary business with well-established offerings in prepayment savings and the corporate and consumer gift card and voucher sector.

Appreciate Group brings a well-established technology platform, a strong customer base, a network of popular brand partners and significant headroom for growth across the UK consumer and corporate gifting markets which is valued at more than £8bn in the UK. The Acquisition will strengthen our digital payments offering and create an enhanced retail proposition across our partner network, including more than 28,000 convenience stores, delivering additional growth opportunities for the Enlarged Group.

More specifically, the proposed acquisition would jointly target growth in three broad areas: prepayment saving through Park Christmas Savings to support customers with budgeting tools for Christmas and other events; an enlarged full-service offering for gifting, employee rewards and benefits to Appreciate Group’s corporate clients; and an extended consumer gifting network for the Love2shop brand.

PayPoint’s Board believes that Appreciate Group is an earnings enhancing acquisition that will deliver attractive returns for shareholders.”

Commenting on the Acquisition, Guy Parsons, Executive Chairman of Appreciate Group, said:

“PayPoint’s offer represents an attractive premium for Appreciate Group Shareholders providing an opportunity to exit the majority of their shareholdings for cash, whilst participating in the potential upside of the combined Appreciate Group and PayPoint businesses over the long-term. We believe that all three segments of the Wider Appreciate Group’s business can prosper under PayPoint’s ownership given PayPoint’s capabilities, and that the Acquisition represents a good opportunity for all our stakeholders to benefit from both the immediate cash consideration and the potential future value creation and enhanced capabilities to Appreciate Group’s consumer and corporate clients arising as a result of the combination of the businesses.”