PE-backed Quisitive to buy BankCard USA Merchant Services

Quisitive Technology Solutions has agreed to acquire BankCard USA Merchant Services, a Westlake Village, California-based merchant payment services provider. The deal, expected to close in Q2 2021, will see Quisitive pay $100 million in cash and issue 50 million shares. Toronto-based Quisitive, a Microsoft solutions provider, earlier this month secured funding from FAX Capital Corp.

PRESS RELEASE

TORONTO, March 29, 2021 (GLOBE NEWSWIRE) — Quisitive Technology Solutions Inc. (“Quisitive” or the “Company”) (TSXV: QUIS) a premier Microsoft Solutions Provider, is pleased to announce that it has entered into a stock purchase agreement dated March 29, 2021 (the “Agreement”) to acquire BankCard USA Merchant Services, Inc. (“BankCard”) for US$100 million in cash and the issuance of 50,000,000 common shares in the capital of Quisitive (the “Transaction”).

BankCard, an arm’s length party to Quisitive, is an established all-in-one merchant payment services provider with over US$3.0 billion of payment volume which increased 31% in 2020. BankCard USA has a seasoned payments industry management team, strong in-house sales team, deep risk management program and attractive recurring revenue model with card-not present volume representing approximately 70%. The acquisition of BankCard will serve as a growth catalyst for Quisitive’s LedgerPay payment processing and payments intelligence™ platform. BankCard has trailing-twelve months revenue of US$29 million and EBITDA of US$11 million as of September 30, 2020.

“The addition of BankCard USA to the Quisitive Payments Solutions family will bring our vision to life by combining a high-powered sales organization, robust risk management, and quality customer service with our innovative fintech platform, LedgerPay” said Quisitive CEO Mike Reinhart. “It is partnerships like these that elevate a great product to industry-wide transformation. I am proud to say that with the addition of BankCard USA, Quisitive Payments Solutions will have the team, the technology, and the strategic vision in place to redefine modern payments at scale.”

“Bankcard USA is proud to join the Quisitive team and make an impact by integrating our go-to-market strategies and the strength of our sales organization with their fintech payments platform, LedgerPay, as it goes to market,” said BankCard USA CEO Shawn Skelton. “We also bring a deep history in merchant services that will guide Quisitive Payments Solutions to take a white-glove approach, providing unique, high-value payment services to their customers, as Bankcard USA has for many years.”

Financial Highlights
Pro forma for the Transaction, Quisitive would have generated LTM Revenue as of September 30, 2020 of US$71 million and LTM EBITDA of US$17 million (before synergies) excluding Q4 2019 Menlo Technologies acquisition and the Mazik Global acquisition announced on March 22, 2021.

Transaction Summary
Under the terms of the Agreement, consideration payable by Quisitive to BankCard shareholders includes 50,000,000 common shares of Quisitive (“Common Shares”) and US$100 million in cash. The shareholders may also be entitled to additional contingent consideration in the form of a performance earn-out if BankCard achieves certain financial thresholds during the two-year period following the closing of the Transaction. The amount of the earn-out is a maximum of US$20 million payable in a combination of cash and Common Shares.

BankCard shareholders have agreed to a 24-month lock-up agreement on the Common Shares with 25% of Common Shares released on each 6-month anniversary of the transaction. As a condition to closing, Quisitive will also enter into employment agreements with key BankCard management. In connection with the issuance of the Common Shares on closing of Transaction, the Company intends to enter into a registration rights agreement with each of the shareholders of BankCard that will provide certain demand registration and piggy-back registration rights in favour of the shareholders.

The Transaction is also subject to TSX Venture Exchange (“TSXV”) and other necessary regulatory approvals, and the receipt of third-party consents, together with other customary closing conditions in a transaction of this nature. Closing of the Transaction is expected to occur in the second quarter of calendar 2021.

Financing Summary
The Transaction is being financed through a combination of new bank debt and equity. Quisitive has secured committed debt financing from a syndicate of Canadian banks pursuant to an amendment to the terms of an existing loan agreement to increase the maximum commitment under the existing term loan by US$50 million which shall be used to fund a portion of the Transaction.

Quisitive has also entered into an agreement pursuant to which Scotiabank, Eight Capital and Canaccord Genuity, as joint bookrunners, together with a syndicate of underwriters (collectively, the “Underwriters”), will purchase on a “bought deal” basis 33,400,000 subscription receipts of the Company (the “Subscription Receipts”) at a price of $1.50 per Subscription Receipt (the “Issue Price”) for aggregate gross proceeds to Quisitive of $50,100,000 (the “Offering”). The Company has granted the Underwriters an option, exercisable, in whole or in part, at any time not later than the 30th day following the closing of the Offering, to purchase up to an additional 15% of the Offering at the Issue Price for market stabilization purposes and to cover over-allotments, if any (the “Over-Allotment Option”). If the Over-Allotment Option is exercised in full, the total gross proceeds of the Offering will be $57,615,000.

Each Subscription Receipt shall represent the right of the holder to receive, upon satisfaction or waiver of certain release conditions (including the satisfaction of all conditions precedent to the completion of the Transaction other than the payment of the consideration price) (the “Escrow Release Conditions”), without payment of additional consideration, one Common Share, subject to adjustments and in accordance with a subscription receipt agreement to be entered into upon closing of the Offering (the “Subscription Receipt Agreement”).

The gross proceeds from the sale of the Subscription Receipts, less 50% of the Underwriters’ commission and the expenses of the Underwriters incurred in connection with the Offering, will be deposited and held in escrow pending the satisfaction or waiver of the Escrow Release Conditions by Computershare Trust Company of Canada, as subscription receipt and escrow agent under the Subscription Receipt Agreement. If the Escrow Release Conditions are not satisfied or waived prior to June 30, 2021 (subject to extensions in limited circumstances), the escrowed proceeds of the Offering will be returned on a pro rata basis to the holders of Subscription Receipts, together with the interest earned thereon, and the Subscription Receipts will be cancelled and have no further force and effect, all in accordance with the terms of the Subscription Receipt Agreement.

The Closing of the Offering is expected to occur on or about April 8, 2021 and is subject to TSXV and other necessary regulatory approvals.

The net proceeds from the Offering will be used to partially fund the cash portion of the Transaction.

The Subscription Receipts will be offered by way of (i) a prospectus supplement (the “Prospectus Supplement”) to Quisitive’s short form base shelf prospectus dated June 12, 2020, which Prospectus Supplement is expected to be filed with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada on or prior to March 31, 2021; (ii) in the United States by way of private placement pursuant to the exemption from registration provided for under Rule 144A of the United States Securities Act of 1933, as amended; and (iii) in jurisdictions outside of Canada and the United States as are agreed to by the Company and the Underwriters on a private placement or equivalent basis.

The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.

Concurrent Private Placement
Pursuant to existing contractual rights, FAX Capital Corp. (TSX: FXC & FXC.WT) (“FAX”) has agreed to purchase 3,333,333 Subscription Receipts at the Issue Price for gross proceeds of $5,000,000 (the “Concurrent Private Placement”). The Concurrent Private Placement is expected to close concurrently with the Offering, subject to the TSXV and other necessary regulatory approvals. FAX will receive a capital commitment fee payment from the Company equal to 3.5 per cent of the aggregate subscription amount of the Concurrent Private Placement. The Subscription Receipts issuable to FAX will also be subject to a statutory four month and one day hold period.

The proceeds of the Concurrent Private Placement will be used to partially fund the cash consideration portion of the Transaction and for general corporate purposes.

Advisors and Counsel
Scotiabank is acting as exclusive financial advisors to Quisitive. Cassels Brock & Blackwell and Jaffe Raitt Heuer & Weiss, P.C. are acting as Canadian and U.S. legal counsel, respectively, to Quisitive. Elmcore Securities is acting as exclusive financial advisor to BankCard USA. Stikeman Elliott LLP and Roxborough Pomerance Nye & Adreani are acting as Canadian and U.S. legal counsel to BankCard. Wildeboer Dellelce LLP is acting as counsel to the Underwriters. Gardiner Roberts LLP is acting as counsel to the lenders on the debt financing.

About Quisitive
Quisitive (TSXV: QUIS) is a premier, global Microsoft partner that harnesses the Microsoft platform and complementary technologies, including custom solutions and first-party offerings, to generate transformational impact for enterprise customers. Our Cloud Solutions business focuses on helping enterprises move, operate, and innovate in the three Microsoft clouds. Centering on our LedgerPay product suite, our Payments Solutions business leverages the Microsoft Azure cloud to transform the payment processing industry into an entirely new source of customer engagement and consumer value. Quisitive serves clients globally from nine employee hubs across the world. For more information, visit www.quisitive.com and follow @BeQuisitive.

About BankCard
BankCard USA Merchant Services, Inc. is a leading independent sales organization/merchant services provider that offers all-in-one payment processing solutions to merchants located in the United States. As a registered and full-acquiring ISO/MSP, BankCard has approximately 7,000 merchants on its payment processing platform and is rapidly growing its software solution called AgeChecker, which provides a secure and trusted technology for ecommerce transactions that require independent online age verification. Based in Westlake Village, CA, BankCard USA was formed in 2004 and has over 40 employees.