Having upped a bet in blank check company Netfin Acquisition Corp. (NFIN, Financial) earlier this month, billionaire investor Steven Cohen (Trades, Portfolio) disclosed earlier this week his firm, Point72 Asset Management, established a 5.6% stake in FinTech Acquisition Corp. III (FTAC, Financial).
With the goal of generating superior risk-adjusted returns, the guru's Stamford, Connecticut-based firm invests in a wide range of asset classes worldwide. Its long-short strategy is based on bottom-up research processes focusing on fundamentals and macroeconomic conditions.
According to GuruFocus Real-Time Picks, a Premium feature, Cohen invested in 2.48 million shares of the Philadelphia-based special purpose acquisition company on Oct. 8, allocating 0.17% of the equity portfolio to the stake. The stock traded for an average per-share price of $10.24 on the day of the transaction.
The company, which agreed to merge with integrated payments provider Paya on Aug. 3., has a $470.78 million market cap; its shares were trading around $10.57 on Thursday with a price-earnings ratio of 85.72 and a price-book ratio of 1.39.
According to the price chat, the stock has gained nearly 5% year to date.
Company overview
As a SPAC, FinTech acts as a shell company that has no commercial operations but raises capital through an initial public offering in order to acquire or merge with another existing company.
Headquartered in Atlanta, Paya provides integrated payment solutions, processing over $30 billion for more than 100,000 customers. Through its proprietary card and ACH platform called Paya Connect, the company teams up with software providers to deliver vertically tailored payments solutions to customers in a range of underpenetrated end markets, including business-to-business goods and services, health care, non-profit and faith-based organizations, government entities, utilities and education.
Deal details
According to the terms of the agreement, the cash portion of the transaction will be funded by FinTech's cash in trust as well as a private placement from various institutional investors. The remainder will consist of shares of its common stock in the combined company. Existing shareholders of Paya could potentially receive additional shares if certain price targets are met. Private equity firm GTCR will remain its largest shareholder.
After receiving the appropriate regulatory approvals, the newly formed entity, which will be called FinTech Acquisition Corp. III Parent Corp., will merge a subsidiary with FinTech Acquisition Corp. III. This will result in FinTech Acquisition Corp. III Parent Corp. becoming the new parent company. The seller entities will then trade certain equity interests with the parent company in exchange for the afore-mentioned cash and equity considerations. The combined company will then change its name to Paya Holdings Inc. and be listed on the Nasdaq under the symbol "PAYA." The implied enterprise value for the new company is approximately $1.3 billion.
Following the deal's close, which is expected to occur during the fourth quarter, Paya's current management team will continue to head operations. In a statement, CEO Jeff Hack expressed his excitement for the pending deal that will "accelerate" its plan to become a publicly traded company.
"Paya has a long and proven history of creating differentiated value for software integration partners and their end customers," he said. "We have reached this milestone thanks to a terrific roster of software partners, as well as our talented and dedicated Paya colleagues. As a publicly listed company, we will continue to invest in the product innovation and support our software partners rely on to meet the needs of their clients, as well as have access to capital for additional strategic acquisitions."
FinTech III Chairman Betsy Z. Cohen, who is of no apparent relation to the guru, also shared her enthusiasm for the deal.
"Integrating payment solutions with software is the fastes- growing segment of the payments industry, and Paya is perfectly positioned as the partner of choice for sophisticated software providers and middle market business clients across multiple attractive verticals," she said. "Jeff and his team have created innovative solutions that anticipate the needs of the market which provides a clear, strategic vision for accelerating growth at Paya."
Guru interest
As previously noted, private equity firm GTCR will remain the company's largest institutional shareholder following the close of the deal. Of the investors covered by GuruFocus, however, Cohen has the largest stake, followed by Mario Gabelli (Trades, Portfolio) with 0.03% of outstanding shares.
Portfolio composition
Cohen's $15.33 billion equity portfolio, which was composed of 778 stocks as of the three months ended June 30, is most heavily invested in the health care, technology and consumer cyclical sectors. Financial services stocks represent 9.59% of the equity portfolio.
Other financial services companies Cohen owned as of the end of the second quarter included RenaissanceRe Holdings Ltd. (RNR, Financial), PayPal Holdings Inc. (PYPL, Financial), Arch Capital Group Ltd. (ACGL, Financial), Equitable Holdings Inc. (EQH, Financial) and Capital One Financial Corp. (COF, Financial).
Disclosure: No positions.
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