Lightspeed strikes twice: Montreal company announces second $400-million+ US deal in a month, collapses shares to single class

Lightspeed strikes twice: Montreal company announces second $400-million+ US deal in a month, collapses shares to single class

Lightspeed POS Inc. announced its second $400-million-plus U.S. acquisition in less than a month Tuesday as it continues its efforts to consolidate the fragmented market for internet-based point-of-sale and payments products for retail and hospitality companies.

The Montreal software company said it would pay US$430-million in cash and stock for Upserve Inc., a Rhode Island-based company that provides internet-based restaurant management software to 7,000 restaurants in the US, generating $40-million in revenue annually. The deal comes just four weeks after Lightspeed said it would pay US$440-million for New York-based ShopKeep Inc., which generates US$50-million in annual revenues from 20,000 US restaurants.

“We’re doubling down on the US,” Lightspeed CEO and founder Dax Dasilva said, adding his company had been in talks with privately held Upserve for more than a year. “We want to have best-in-class teams and technologies so we can be strongly positioned in the US both on the retail and hospitality side when we have the full reopening of the economy” after the pandemic.

Asked if the company could handle integrating its two largest acquisitions at once, Mr. Dasilva replied that the company is a veteran acquirer, having bought nine previous companies. “We think M&A [mergers and acquisitions] is embedded into the DNA of the company, ” he said. “We have a very solid playbook for integrating these companies.”

Lightspeed is paying about US$123-million in cash and issuing 5.9-million subordinate voting shares to buy Upserve, which is led by CEO Sheryl Hoskins

The company also said the dilutive impact of the cash-and-share transaction would trigger the automatic conversion of its multiple voting shares into subordinate voting shares on a one-for-one basis in accordance with terms of its capital structure. The conversion means Mr. Dasilva’s voting stake in the company will shrink to 12.2 per cent from 37.1 per cent as his 14.4 million multiple voting shares – worth close to $1-billion on paper – become single voting shares.

With the two deals, Lightspeed will have 107,000 customer locations globally serving the restaurant, retail, hospitality and golf markets and processing more than US$39-billion in transaction revenue. The combined pro-forma revenues of the company post-acquisition would be U$243-million in the last 12 months.

Lightspeed has had a lot of momentum lately: the company’s stock has appreciated by 60 per cent in the past month after it reported stronger-than-expected second-quarter earnings and announced the ShopKeep deal. The company also went public on the New York Stock Exchange in September, raising US$332-million in gross proceeds. Lightspeed first went public on the Toronto Stock Exchange in March 2019 at C$16 a share and its stock has more than quadrupled in value since then.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Published at Tue, 01 Dec 2020 23:12:14 +0000