WEX Inc. announced it has entered into a definitive agreement to acquire Electronic Funds Source (“EFS”) for a total consideration of approximately $1.1 billion in cash and 4.0 million shares of common stock to be issued to investment funds affiliated with Warburg Pincus, EFS’ current owner. The acquisition is expected to be immediately accretive to adjusted net income.
“We are very excited about the prospect of combining these two great companies, which have a strong customer orientation, aligned strategy and a complementary footprint,” said Melissa Smith, WEX’s president and chief executive officer. “We believe this acquisition strengthens our value proposition to customers with a portfolio of best-in-class offerings that will better meet their evolving needs. Additionally, we have the opportunity to draw on the strengths of both companies to drive further scale across the organization, enhance our existing over-the-road business, better serve the needs of mixed fleets and improve the functionality and service we provide to our customers. We look forward to welcoming EFS to WEX and are confident that this combination will deliver long-term value for our shareholders.”
WEX said EFS’ “strong track record and broad customer acceptance in mid- and large-sized over-the-road (“OTR”) fleet segments is an ideal complement to WEX.” “The combined company would serve the needs of all sizes and types of fleets by drawing on strengths from both companies’ offerings to provide a more efficient, more comprehensive and better-integrated solution to all customers,” according to WEX.
EFS’ OTR platform adds functionality in controls, permitting, fuel price analytics, mobile account maintenance and acceptance in Canada, WEX said. Furthermore, according to the company, WEX and EFS have focused on different parts of the corporate payments spectrum, which will allow customers to benefit from the combined company’s more diverse set of capabilities. For WEX customers, this includes the addition of a variety of corporate card options, including a single, multi-purpose card.
“Moving forward, the combination would deliver continuous innovation and sector expertise to anticipate industry trends and adapt the combined offering accordingly,” WEX said.
Scott Phillips, president and chief executive officer of EFS, stated, “We are very pleased to be joining forces with a great organization like WEX, which shares our focus on continued product innovation, superior service and maintaining long-term customer relationships. I look forward to joining the WEX organization, as this combination represents a great match and a win-win for the employees and customers of both companies.”
Upon closing the transaction, the acquisition is expected to be immediately accretive to adjusted net income, WEX said. The company said it expects to realize run-rate synergies of approximately $25 million over a three year period, excluding one-time integration costs, and to realize approximately $275 million in present value of tax benefits.
The transaction, which has been unanimously approved by the WEX board of directors, is subject to regulatory approvals and other customary closing conditions.
Upon closing, investment funds affiliated with Warburg Pincus will become WEX’s largest shareholder. Warburg Pincus’ managing director and member of the executive management group, Jim Neary, will join WEX’s board of directors.
“We are excited about the future of the combined company,” Neary said. “We are looking forward to being a shareholder of WEX and partnering with Melissa, Scott and the WEX team.”