Equity firm pays €45m for 69% Payzone stake

PAYZONE, THE Irish electronic payments company, has announced that private equity group Duke Capital will invest €45 million in the company in exchange for a 69 per cent shareholding.

Existing shareholders will see the value of their holdings wiped out as a result of the financial restructuring. Payzone’s banks will also take an equity stake of 16 per cent and seven members of senior management will take 15 per cent.

The amount of debt owed by Payzone to its seven banks – which include AIB, Bank of Scotland, Royal Bank of Scotland and Abbey National – will be reduced from €320 million to €82 million following the deal, agreed late on Friday.

Payzone chief executive Mike Maloney said the wiping out of existing shareholdings was “unavoidable” as all the potential investors that the company had talked to over the past year had valued the company at below the size of its debts. “There were no alternatives,” he said yesterday.

Payzone’s largest shareholder is Balderton Capital, the venture capital group led by Mr Maloney’s brother Barry Maloney, which owns 54 per cent. Former chief executive John Nagle, who was sacked in 2008, is the second biggest investor.

Shares in Payzone, which is listed on the London Stock Exchange’s Alternative Investment Market (AIM), were suspended on Friday, pending an announcement of the deal.

A new company, which will continue to trade as Payzone, will be formed following the investment by Duke Street, a London-based private equity group with more than €2 billion under management. Ernst Young were appointed receivers to Payzone Plc late on Friday and the company will delist from AIM when the deal is completed.

Payzone emerged from the 2007 merger of Irish e-payments group Alphyra and UK ATM operator Cardpoint. Carrying a heavy burden since the merger, the firm’s management has over the past year sold off international assets that were not generating cash and cut staff numbers.

Mr Maloney said the restructuring would help to safeguard 500 jobs across the countries in which Payzone operates.

The e-payments side of the Payzone business manages terminal networks in the UK, Ireland, Sweden, Greece and Romania, processing a range of electronic transactions including mobile top-up, utility top-up, bill payments, electronic gift vouchers and electronic funds transfer.

The Cardpoint side of the business, known as Cashzone, deploys ATMs in the convenience sector in the UK and Germany.

Duke Capital and Mr Maloney have identified new payment services for cash-less parking and prepaid debit cards as targets for growth.