Brazilian credit card processor StoneCo has inked a stock and cash deal to buy the software company Linx for BRL6.04bn ($1.1bn).
StoneCo hopes that the acquisition will transform it into an integrated software and payment provider.
The acquisition deal comes at a time when the Warren Buffet-backed credit card processor is facing severe competition in Brazil, with prices under pressure.
StoneCo CEO Thiago Piau said: “We are excited to join efforts with Linx in this journey and are looking forward to combining Linx’s deep expertise in vertical software and omnichannel solutions with Stone’s powerful technology and financial services capabilities, our strong client-centric culture and powerful distribution channels.”
According to the transaction terms, StoneCo will finance the deal with a share offering of $1bn.
For each Linx share worth BRL33.7625, StoneCo is offering one newly-issued class A and class B preferred shares to Linx’s shareholders.
The proposed shares represent a 41.6% premium over Linx shares based on their 60-day volume-weighted average price.
Linx has agreed to pay a breakup fee of BRL605m to StoneCo in case of antitrust issues.
If shareholders reject the deal, Linx will pay 25% of the said breakup fee.
Post-acquisition, Linx will become StoneCo’s new software business unit and StoneCo will gain access to 70,000 retail clients of Linx.
Through other providers, Linx clients currently process BRL300bn ($55.74bn) in gross transaction volumes.
StoneCo is planning to offer its banking services and credit to these clients.
Moreover, Linx currently has an active partnership with Sao Paulo-based lender Itaú Unibanco’s subsidiary Redecard, which will bring StoneCo a new revenue stream.
Linx CEO Alberto Menache said: “The mission, vision, and values of Linx and Stone are a winning combination that will benefit all stakeholders: clients, collaborators, and shareholders of both companies.”