The initial consideration for the acquisition is £5.25 million with the remaining consideration of £0.75 million paid nine months after completion.
International payments and banking services provider Fairfx Group PLC (LON:FFX) continues to expand. About six months after the completion of the acquisition of CardOne, FairFX announces another deal – this time with its long-standing partner City Forex.
In a filing with the London Stock Exchange, FairFX says that it has acquired the entire issued ordinary share capital of City Forex Limited for a consideration of £6 million payable in cash.
The consideration of £6 million (which is subject to adjustments for cash and working capital and is on a cash-free, debt-free basis) is set to be paid from existing FairFX cash resources. The initial consideration for the deal is £5.25 million with the remaining consideration of £0.75 million poised to be paid nine months after completion.
The Financial Conduct Authority (FCA) has already granted its approval for the change of control of City Forex Limited.
The deal marks a further milestone in the evolution of FairFX and is expected to be immediately earnings enhancing.
City Forex’s service offering is focused on two key products, International Payments and Travel Currency, which is accessible to both business and consumer segments through its proprietary platform and its three central London based branches respectively. Its customer base includes business customers that range from City-based businesses to SMEs around the UK.
Let’s note that City Forex has been a partner of FairFX since 2007 – it provides the operations for FairFX’s Travel Currency service.
One of the benefits of the acquisition is that the enlarged Group will control the entire supply chain for the Travel Currency service. Moreover, City Forex’s International Payments business is expected to provide economies of scale from banking partners when combined with existing FairFX volumes.
City Forex’s innovative proprietary system that processes both the Travel Currency and International Payments businesses with a high degree of automation will be combined with FairFX’s existing platform to yield further efficiencies for the Group as well as increased capacity for growth. Furthermore, the City Forex platform has a customer-facing portal offering “self-serve” international payments to corporates at bespoke spreads (approximately 40% of City Forex business is conducted this way), which is a capability that FairFX was planning to add in 2018. The end-to-end nature of the platform, covering customer interface all the way through to automated settlement, represents a significant jump forward in functionality and efficiency for the Group.
The opportunities for revenue enhancement for the Group from cross-selling FairFX products to City Forex customers are considerable, particularly for the FairFX Corporate Expense Card and Platform. In addition, it is FairFX’s intention to utilise its existing infrastructure and marketing methodology to engage with the City Forex customer base.
Let’s also mention some financial metrics for City Forex. For the 12 months ended October 31, 2017, City Forex generated revenue of £4.4 million from turnover of £570 million which resulted in an EBITDA (pre-exceptional items) of £0.7 million, a PBT of £0.3 million and had assets, excluding client cash and grossed up debtors and creditors, of £4.1 million.