Business Context and Reporting Period
Newtek Business Services Corp. (Newtek) filed this Form 8-K on July 29, 2015, reporting events occurring on July 23, 2015. The filing details the acquisition of Premier Payments LLC, an electronic payments processor, by Newtek Business Services Holdco 1, Inc., a subsidiary of the Company.
Key Financial Metrics and Transaction Details
- Total Purchase Price: $16,483,406.00
- Cash Consideration: $14,010,900.08 (paid from cash on hand)
- Equity Consideration: $2,472,505.92 (paid via 130,959 newly issued restricted shares of Common Stock)
- Valuation Methodology: Based on 6x combined annualized EBITDA of Premier and conveyed portfolios, plus 3x combined annualized residual cash flows for two specific customer accounts.
- Financial Performance: The filing does not provide specific revenue, profit, cash flow, margin, or debt figures for the Company or the acquired entity.
Material Changes and Related Party Transactions
The primary material change is the completion of the acquisition of Premier Payments LLC. The transaction involves a related party, Jeffrey Rubin (the Seller), who owns approximately 9.82% of the Company's outstanding common stock and is a former president. Additionally, the Seller controls JR Group, Inc. (JRG), which previously acted as an independent sales agent for one of Newtek's portfolio companies. As part of the deal, JRG's merchant payment processing portfolios were conveyed to Premier, and the sales agent contracts were assigned to Premier.
Guidance, Risks, and Unusual Items
- Forward-Looking Statements: The filing includes standard disclaimers regarding risks such as intensified competition, operating problems, and legislative developments that could cause actual results to differ from expectations.
- Unregistered Securities: The 130,959 shares issued as part of the purchase price were sold pursuant to the private offering exemption of Section 4(a)(2) of the Securities Act of 1933 and are restricted.
- Consulting Agreement: The Seller entered into a Consulting Agreement to provide business development services to the Company.
- Outlook: No specific financial guidance or future earnings outlook is provided in this filing.
Key Facts for Investor Verification
- Verify the impact of the $14 million cash outflow on the Company's current liquidity position.
- Confirm the dilution effect of the 130,959 newly issued restricted shares on existing shareholders.
- Review the full Membership Interest Purchase Agreement (Exhibit 10.1) for specific non-compete terms and indemnification provisions.
- Assess the integration risks associated with the related-party nature of the transaction and the assignment of contracts from JRG to Premier.
- Check subsequent filings for the actual EBITDA and residual cash flow figures used to calculate the purchase price.