Toronto-based Payfare is defending itself and its acquisition deal with American FinTech giant Fiserv after minority stakeholder Kingsferry Capital Management called on shareholders to reject the deal this week.
In late December, the Toronto Stock Exchange-listed company announced it agreed to be acquired by Fiserv in a $201.5-million CAD ($140 million USD) deal at $4 CAD per share; a 90-percent premium over its pre-announcement closing price. Payfare came to the deal through a strategic review it initiated in September 2024, following its stock price plummeting to an all-time low after losing its biggest client, DoorDash, to Fiserv itself.
“Kingsferry and Mr. Chan have not put forward any alternative plan or better offer.”
In a letter urging shareholders to reject the deal sent out on Tuesday evening, Kingsferry, which has gathered an approximately 10.6-percent stake in Payfare through annual stock purchases over the past four years, claimed the deal is a significant undervaluation and alleged conflicts of interest among insiders.
Specifically, Kingsferry said that Payfare is misleading shareholders by classifying the deal as a significant premium, because it was based on a “deeply distressed stock price” far below its intrinsic value. The firm, whose website says it is regulated by the British Virgin Islands Financial Services Commission, scrutinized Payfare for excluding previously discussed pipeline opportunities from the financial forecasts used to justify the acquisition. It also said that not all synergies that could benefit Fiserv, like its fraud detection system, had been considered.
Payfare disputed the claims on Wednesday morning, reiterating that the deal’s 90-percent premium outperforms the median and average of comparable transactions over the past five years. The company pointed out that Kingsferry had never raised any concerns or objections through the strategic review process, and added the deal does factor in the components Kingsferry claimed were omitted. Additionally, the company’s board said Payfare believes being acquired is simply less risky than continuing solo.
“The Board considered the risks involved in Payfare achieving its standalone plan, including its pipeline opportunities and determined that the transaction with Fiserv provides certainty against potential downside factors tied to Payfare achieving its standalone plan,” Payfare’s statement read.
RELATED: Fiserv to acquire Payfare in $201.5-million CAD deal after swiping its DoorDash business
Kingsferry also accused Payfare’s board of having conflicts of interest stemming from “restricted share units (RSUs), change-of-control payouts, debt forgiveness to certain directors, and lucrative employment contracts,” but did not elaborate on whom these specifically benefit. The firm questioned the timing of Payfare approving more than 1 million RSUs (shares that cannot be immediately sold) to “certain insiders” just before it received an initial offer from Fiserv in November.
In response, Payfare took aim at Kingsferry co-founder Hugo Chan, a former Payfare director, claiming he had approved of such grants during his time on the company’s board.
“Ironically, Mr. Chan, during his time as a Payfare board member, voted to approve many of the ordinary course compensation arrangements for the company’s board and executives that he now criticizes, all of which have been publicly disclosed to investors,” Payfare’s statement reads.
“Kingsferry and Mr. Chan have not put forward any alternative plan or better offer,” the statement says.
Payfare is holding a shareholder meeting to determine if the deal will go through on the morning of Feb. 21. Shareholders must have their proxy vote on the transaction submitted before Feb. 19 at 11 a.m. ET.
Feature image courtesy Nicholas Cappello via Unsplash.