Why the Change (ASX:CCA) share price rocketed 43% today

The Change share price has rocketed higher today after the company announced a takeover of Wirecard assets.

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The Change Financial Ltd (ASX: CCA) share price is today surging higher after it announced a strategic acquisition.  The Change share price rose an astounding 43% to 16.5 cents on the news. It is currently trading at 16 cents, up a hefty 39.13%.

What is Change Financial?

Change Financial, formerly ChimpChange, is a US-focused fin-tech company developing innovative and scalable payments technology to provide solutions for businesses and financial institutions.

Change Financial is currently building a Mastercard-registered enterprise payments and card processor.

Acquisition news

The Change share price shot higher after the company announced a binding agreement to buy Wirecard NZ & Australia assets for A$7.8 million. The acquisition represents an EV/Revenue multiple of 0.5x based on FY20 revenue of approximately US$11.1 million.

Impressively, the acquisition brings significant scale and growth through the addition of 120 customers and capability in more than 35 countries. Moreover, Wirecard had a blue chip client base including the big 4 Australian banks, major Australian supermarkets, Asian and South American banks and fintechs.

In June, Wirecard was placed into voluntary administration. Following an extensive due diligence and highly competitive sale process, Change Financial was selected as the preferred bidder for the assets. Wirecard provides innovative payment management and platform solutions.

Cash consideration and costs are proposed to be funded via a placement raising $6.4 million and an entitlement offer to existing shareholders raising approximately $4.9 million.

Capital raising

The company has received unconditional binding commitments for a placement to institutions, sophisticated and professional investors. The placement price is 9.5 cents per share. This represents a 17.4% discount to the last Change share price close.

This will be swiftly followed by an entitlement offer to eligible shareholders. Eligible shareholders will be able to receive 2 new shares for every 11 shares currently held at the price of 9.5 cents as above.

Foolish takeaway

In completing the acquisition, Wirecard will provide Change with a huge amount of potential clients across the globe. Furthermore, the company was earnings before interest, taxes, depreciation and amortisation (EBITDA) positive and generated strong revenue before it fell into administration. This deal also represents impressive value for money as Change is only paying 0.5x revenue.

The Change share price is currently trading 43% higher after the news.

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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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