The EML Payments Ltd (ASX: EML) share price is under the spotlight today on media reports the business has been in takeover talks.
EML Payments is an ASX tech share that provides payment technology for various uses such as gift cards, virtual accounts, gaming payouts and buy now, pay later.
Potential EML takeover
According to reporting this morning by Street Talk in the Australian Financial Review, the private equity group Bain Capital has been sniffing around EML.
The AFR reported that EML has "gone a few rounds" with takeover talks with the private equity player. This included a period of exclusivity, allowing Bain to do some due diligence on the payments business.
That exclusivity ended at the end of March 2022, with no deal agreed.
According to the AFR's sources, Bain has "walked away" from the table "for now". A key sticking point was the price needed to seal the deal.
There have already been many weeks of "high-level talks" between EML Payments and Bain Capital.
The AFR reported:
It remains to be seen whether Bain has a change of heart and returns with a higher offer. Sources said Bain loved the business, its footprint and had invested in similar companies offshore in the past, but couldn't stack up the mooted price tag, which was well above $1 billion.
EML response
EML responded to the article this morning by putting out a statement to the ASX.
The company said:
EML confirms that earlier in the year it was in discussions with Bain Capital regarding a potential change of control proposal. Those discussions have now ceased. The Board of EML will always consider proposals presented to the company and is fully committed to acting in the best interests of, and maximising value for, EML shareholders. EML appointed Goldman Sachs as its financial adviser and Herbert Smith Freehills as its legal adviser.
What is driving this interest in EML?
It has been a challenging period of time for EML shareholders. Since the start of 2022, the EML Payments share price has fallen by around 20%. In the last year, EML shares have dropped 54%.
The AFR said that a few investment banks have been trying to find a potential buyer for EML Payments amid its difficulties with the Central Bank of Ireland (CBI) and a general sell-off of tech names.
CBI decision not the worst case?
After looking at EML's Irish subsidiary, the CBI decided on three things.
It would permit EML to sign new customers and launch new programs while staying within the material growth restrictions. EML's subsidiary is confident it can meet these obligations.
Second, broad-based reductions in limit controls on programs will not be imposed. The CBI said it was satisfied to continue to engage with EML's subsidiary, with a view to agreeing on appropriate limits.
Finally, it said the CBI intends to put a material growth limitation over the Irish subsidiary's total payment volume.
EML has been removing higher volume lower-yielding programs to enable it to comply with the material growth restriction and is confident it can meet those obligations.
Is the EML share price attractive?
Macquarie recently called EML shares a buy with a price target of $3.95. That's a possible upside of almost 50%. It suggested that the ASX payment share can benefit from rising interest rates, helping it earn interest income on the money it's holding.
