Payroc WorldAccess to acquire i3 Verticals’ payments business for $440 million

NASHVILLE: Payroc WorldAccess LLC, a leading omni-channel payments provider, has entered into a definitive agreement to acquire i3 Verticals Inc’s  (NASDAQ: IIIV) merchant of record payments business, including its associated proprietary technology, in an all-cash transaction for $440 million, subject to certain purchase price adjustments.

Greg Daily, Chairman and CEO of i3 Verticals stated, “i3 began as a payments business, and we built a top-of-the-line merchant of record payment platform bringing a wide variety of solutions to third-party partners and software providers. We do not part with this platform lightly and we believe that it has a bright future. We are proud and appreciative of our team managing this business and are confident we have found them the right home.

“This is a key strategic moment for our Company. After the divestiture, we will be a pure vertical market software business focused entirely on the Public Sector, Education and Healthcare markets. Importantly, we have retained our payment facilitation platform and our ability to attach payments to our vertical software solutions. Upon the completion of this disposition, our balance sheet will be stronger than ever, and we are excited to begin our next chapter.”

“Payroc is excited about this combination,” said James Oberman, Chief Executive Officer of Payroc. “The i3 merchant business is an ideal fit for Payroc, and their values and goals align with ours. Our ongoing commitment to combine a personal relationship with payments technology will enhance growth for i3’s partners and create opportunity for i3’s team members that join Payroc once the transaction closes.”

The transaction is subject to closing conditions as set forth in the definitive agreement, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The closing is expected to occur sometime in i3 Verticals’ fiscal fourth quarter.

Selling the divested business will simplify i3’s business. The remaining business consists of vertical market software solutions that fit the Company’s customers’ specific enterprise needs.

The divested business includes two non-core assets from i3’s Software and Services segment related to the Non-profit and Property Management vertical markets, representing approximately $4 million in annual adjusted EBITDA. The Company’s customers will be narrowed to three strategic verticals: Public Sector, Education and Healthcare. i3’s ongoing business will be approximately 75% software and related services revenue, and 25% payments and other.

Proceeds from the transaction, after payment of transaction expenses, will go towards paying down debt. After taxes, and in the absence of other acquisitions, the Company expects to be able to pay down all, or nearly all, of its 2023 Senior Secured Credit Facility. After reducing the Company’s debt balance its applicable borrowing rates under the facility will fall by 1% and remain there until such time that Consolidated Total Net Leverage Ratio reaches 2x.

Raymond James & Associates, Inc. are serving as financial advisors to i3 Verticals and Bass, Berry and Sims, LLP is serving as the Company’s legal advisor. Troutman Pepper Hamilton Sanders LLP is serving as Payroc’s legal advisor.

The Company delivers seamless integrated software and services to customers in strategic vertical markets. Building on its sophisticated and diverse platform of software and services solutions, the Company creates and acquires software products to serve the specific needs of public and private organizations in its strategic verticals, including its Public Sector, Education and Healthcare verticals.

Payroc WorldAccess, LLC is a high-growth merchant acquirer, processor, and payment integrations powerhouse processing more than $93 billion in annual transaction volume for more than 160,000 merchants. Payroc offers best-in-class sales enablement and payment processing technology on a global scale, delivering proprietary, innovative, and full-service merchant acquiring solutions together with key card brand network payment sponsorship registrations. Payroc (through its subsidiaries) is a registered Visa third party processor, a Visa independent sales organization, a Mastercard third-party service provider, a Mastercard member service provider, a payment facilitator, an encryption support organization for Fifth Third Bank, National Association (“Fifth Third”), and, in Canada is registered with Peoples Trust Company, among many others.