Verifone Systems Lands a Big Buyout

In this segment from the MarketFoolery podcast, host Chris Hill is joined by Motley Fool Asset Management's Bill Barker to discuss VeriFone Systems (PAY) going private. A group of private investors led by the firm Francisco Partners is paying $23.04 per share in cash, a 54% premium. Though not a household name, Verifone makes the point-of-sale systems you interact with every time you use a credit or debit card. The Fools think the deal spotlights the continuing decline of cash.

A full transcript follows the video.

This video was recorded on April 10, 2018.

Bill Barker is an employee of Motley Fool Asset Management, a separate, sister company of The Motley Fool, LLC. The views of Bill Barker and Motley Fool Asset Management are not the views of The Motley Fool, LLC and should not be taken as such.

Chris Hill: We have news from the toy industry, restaurants. We have to start with the stock of the day, and that is VeriFone Systems, not exactly a household name. VeriFone shares are up more than 50% this morning. This is a payment technology company that is being taken private for just under $2.6 billion in cash. In sympathy, I suppose, PayPal and Square are up a little bit. Nowhere near the 50%, but, it appears to be a good day for payment technology companies.

Bill Barker: Yeah, for the hardware makers VeriFone and Ingenico. As you say, it's not a household name, but you have come into contact with its products hundreds and hundreds of times without realizing it, probably. And not just in some part of the system that you never see. It is the point-of-sale hardware for your credit card that they are best known for, which also has been part of the problem for this company and this stock over the last couple of years. After peaking a couple of years ago, it's been rough times as other forms of payment, mobile and Square and various other things, are replacing the centrality of that hardware point-of-contact device that you're familiar with. VeriFone and Ingenico basically are the two companies that have almost all of those devices. VeriFone also -- and this is probably the reason that it's attracting a premium of 52% today over what it was trading for yesterday -- is developing software applications, which are probably more important for the future than the hardware.

Hill: Is the war on cash as close to a slam dunk a trend as you see in the world of investing? It's just hard for me to look at cash as having a particularly bright future.

Barker: Yeah. Many weeks, I make it through the week without using cash at all. And then, when I travel internationally now, I usually don't use cash at all, never exchange money, never touch cash. So, yes. And I think there are parts of the economy that are more cash-dependent, certainly the illegal ones, which you know more about than I do, I'm sure.

Hill: [laughs] A little bit, yeah.

Barker: Yeah.

Hill: Alright.

Barker: So, you can better comment on the future of that.

Hill: Some of the more illegal activities out there, they're getting pretty sophisticated. They're going the non-cash route, too.

Barker: They've got the Bitcoin for the really seriously illegal parts of the economy. They're using Bitcoin.

Hill: They are.

Barker: From what I hear.

Hill: Again, I don't have direct knowledge of this that I can comment on at this time, Senator.

Barker: Alright, so, VeriFone's up 52%. That's pretty good. As I said, if you pull back a little bit and look at the chart over a longer period of time, this is really just getting it to prices that it saw not that long ago. It has been a tough last couple of years for the company. But, it is an indication that the private equity market is still healthy and buying things up, because it's going to go private.