SYDNEY, AUSTRALIA: EML Payments Limited (ASX: EML) has announced the divestiture of Sentenial Limited, including its Nuapay services, to GoCardless Ltd.
The transaction, valued at €32.75 million (approximately A$54.1 million), marks a pivotal step in EML’s ongoing strategic review aimed at enhancing profitability and cash flow, the ASX news announcement noted.
The decision to offload Sentenial comes after a November 2023 announcement by EML that it had received expressions of interest for the subsidiary.
Deemed non-essential to EML’s core operations due to its lack of profitability—projecting an EBITDA loss of around A$2 million in FY24—Sentenial also lacked significant product or customer synergy with EML’s other business lines.
This sale is expected to simplify EML’s organizational structure and bolster its balance sheet. The agreement includes customary adjustments for working capital and net debt, along with a potential downward price adjustment tied to key contract performance, capped at €7.5 million.
Additionally, an earn-out component is contingent on recurring revenue from new contracts secured by Sentenial from February 1, 2024, until 30 days post-completion.
The sale agreement carries various warranties and indemnities favoring GoCardless, with warranty insurance covering some, but not all, warranties. Specific indemnities have been provided for certain matters.
Until the sale’s completion, Sentenial will operate under agreed-upon obligations and restrictions, particularly concerning regulatory compliance.
Completion of the sale is contingent upon regulatory approval from both French and United Kingdom financial authorities, with expectations set for a 3 to 6-month timeframe.
Barrenjoey and Barclays have been engaged as financial advisers for the transaction, underscoring the significance of this deal in EML’s strategic realignment.