Wex Inc to acquire EFS LLC for $1.47 bn

Payment technology company Wex Inc said it planned to acquire Electronic Funds Source LLC (EFS), a provider of fleet cards to transportation companies, in a $1.1 billion cash transaction.

Wex will also issue four million shares to investment funds affiliated with EFS's current owner, private equity firm Warburg Pincus LLC, which would make the PE firm, the largest share holder.

According to the South Portaland, Main-based Wex, the deal will diversify its earnings, even as it cuts exposure to fuel price sensitivity.

Wex added, the deal, subject to regulatory approvals, will make additions to earnings and help the company save around $25 million over three years.

According to the company's statement Jim Neary, managing director, Warburg Pincus  and member of its executive management group, will join Wex's board.

Melissa Smith, WEX's president and chief executive officer, said,

''...we have the opportunity to draw on the strengths of both companies to drive further scale across the organization, enhance our existing over-the-road business, better serve the needs of mixed fleets and improve the functionality and service we provide to our customers.''

EFS' strong track record and broad customer acceptance in mid- and large-sized over-the-road (OTR) fleet segments is an ideal complement to WEX. The combined company would serve the needs of all sizes and types of fleets by drawing on strengths from both companies' offerings to provide a more efficient, more comprehensive and better-integrated solution to all customers.

EFS' sophisticated OTR platform adds important functionality in controls, permitting, fuel price analytics, mobile account maintenance and strong acceptance in Canada.

Furthermore, WEX and EFS have focused on different parts of the corporate payments spectrum, which will allow customers to benefit from the combined company's more diverse set of capabilities. For WEX customers, this includes the addition of a variety of corporate card options, including a single, multi-purpose card.

Moving forward, the combination would deliver continuous innovation and sector expertise to anticipate industry trends and adapt the combined offering accordingly.

Additionally, the combination will further diversify WEX's earnings and help to reduce its exposure to fuel price sensitivity. WEX estimates that approximately 16 per cent of EFS' revenue is exposed to fuel prices.

Upon closing the transaction, the acquisition is expected to be immediately accretive to adjusted net income. The company expects to realise run-rate synergies of approximately $25 million over a three year period, excluding one-time integration costs, and to realise approximately $275 million in present value of tax benefits.

The transaction, which has been unanimously approved by the WEX board of directors, is subject to regulatory approvals and other customary closing conditions.

Upon closing, investment funds affiliated with Warburg Pincus will become WEX's largest shareholder.

Neary commented, ''We are excited about the future of the combined company. We are looking forward to being a shareholder of WEX and partnering with Melissa, Scott and the WEX team.''

BofA Merrill Lynch is acting as financial advisor and Wilmer Cutler Pickering Hale and Dorr LLP and Weil, Gotschal & Manges are acting as legal advisors to WEX. Cleary Gottlieb Steen & Hamilton LLP is acting as legal advisor to EFS.