SYDNEY, AUSTRALIA: OFX Group Limited has entered into an agreement to acquire 100% of Firma Foreign Exchange Corporation for a total consideration of C$90 million (A$98 million).
Based in Edmonton, Canada and founded in 1998, Firma Foreign Exchange is a global foreign exchange service provider servicing corporate clients.
As at 30 September 2021, Firma had 194 employees, over 9,600 corporate customers and operates from 9 offices in Canada, Australia, the UK, and New Zealand.
Firma’s key products include spot and market orders, multi-currency accounts, payments and mass payments and forward contracts. The company has strong commercial expertise and will significantly add to OFX’s volumes in major currency pairs such as USD/CAD and USD/GBP, diversifying its currency flows as well as the industries its Corporate segment currently serves.
The acquisition delivers incremental revenue to OFX’s corporate segment of 93% and to its North America region of 121%1, representing more than five years of organic growth. With combined LTM to September 21 pro-forma Group revenue of A$186.5m and EBITDA of A$55.1m, OFX will be a major specialist Corporate cross border payments provider in Canada.
OFX Group Chief Executive Officer and Managing Director, Skander Malcolm said: “This is our first major acquisition and very much aligned with our strategy of building scale in the corporate segment and growing the North American region. Firma generates strong earnings from a high-quality customer base and has an excellent service culture, so there is a lot of alignment with OFX.
By bringing our businesses together we become a much bigger corporate specialist with a strong recurring revenue base and considerable growth opportunities.”
The total consideration represents 9.0x Firma’s LTM EBITDA to 30 September 2021. The Acquisition is expected to generate underlying EPS accretion of approx. >20% in year one and >30% in year two following completion. OFX expects to deliver at least $5m of pre-tax cost and revenue synergies in FY25 through leveraging its global technology platform, larger footprint of licenses and enhanced product offering, and from benefits of scale such as lower banking fees.
The acquisition will be funded by an underwritten debt facility and existing cash. At completion, OFX expects net debt to pro-forma EBITDA of approximately 1.5x. Given the strong cash flow profile of the combined entity, OFX expects to repay its debt in less than four years, subject to no other value-accretive growth opportunities emerging which require funding.
The Board considers it prudent to put the share buy-back program on hold to prioritise repayment of debt.
Mr Malcolm concluded: “Our business is continuing to perform well, with the positive trends we drove in the first half continuing into the third quarter. With the addition of Firma we can accelerate that growth by combining our infrastructure and risk culture with their customer base and service excellence, delivering further profitable growth and value accretion for OFX shareholders.”
The acquisition is expected to complete in first quarter of FY23 subject to customary conditions.
Goldman Sachs is acting as financial advisor on the acquisition. Stikeman Elliot is acting as legal advisor on the acquisition.