Thursday, February 24, 2022

Popular buying its digital bank, applications from Evertec

Popular Inc. in San Juan, Puerto Rico, has agreed to buy its customer experience and key client-facing applications from Evertec.

The $75 billion-asset Popular disclosed in a regulatory filing Thursday that it will pay $197 million for the assets by lowering its stake in Evertec from about 16% to 10.5%. 

The acquisition includes the Mi Banco digital banking platform, cash management online application and other digital customer service applications, Popular said in a slide deck.

The deal is expected to close by June 30.

Popular said it plans to reduce the holdings to below 4.5%, which would eliminate Federal Reserve scrutiny of Evertec tied to the Bank Holding Company Act. 

Popular said it expects the transaction to provide about $16 million in financial benefits in 2023. 

Popular said using Evertec shares as consideration should result in an after-tax gain of about $135 million. The effect of the subsequent sell-down or conversion of Evertec shares to estimated to be $215 million in after-tax gains. 

The “transaction accelerates our digital transformation and increases our control of our customer channels,” Popular added. 

Popular and Evertec also agreed to extend several commercial agreements that had an initial term ending in 2025.

Evertec was once a Popular unit, but the banking company sold a 51% stake in the payments business to Apollo Global Management in 2010. Evertec went public three years later. 

“The deal should be earnings accretive in subsequent years,” Alexander Twerdahl, an analyst at Piper Sandler, wrote in a note to clients. “We view the announcement as a positive for Popular shares as the deal should push earnings higher. and further reduce … share count, while gaining more flexibility for Popular from an operational standpoint.”

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