In a press release Tuesday, SoFi Technologies, Inc. (NASDAQ:SOFI), the digital personal finance company, announced it has entered into a definitive merger agreement to acquire Technisys.
Technisys, a cloud-native banking-software maker, will be purchased for about $1.1 billion by Sofi, the latest in a string of deals designed to transform the lender into a one-stop financial shop.
The all-stock deal is the equivalent of less than 10% of Sofi's market value, with Technisys' shareholders receiving aggregate consideration of 84 million shares of SoFi. Subject to satisfaction of closing conditions, the deal is expected to close by the second quarter of 2022.
Technisys platform will be used to roll out personalized financial services to Sofi's banking customers and will also allow other banks and financial-technology companies to utilize the platform.
"The acquisition of Technisys is an essential building block in delivering on our member-centric, digital one-stop-shop experience for SoFi members and our partners through Galileo, our provider of fintech cloud services." - CEO Anthony Noto, SoFi.
The incremental revenue from the acquisition, including base revenue of Technisys and revenue synergies of the vertically integrated capabilities, is estimated to accumulate margins of $500 million to $800 million through year-end 2025.
INVESTORS' TAKE
Investors don't seem to react too warmly towards the agreement as Technisys' current sales are relatively light, even though the company has been around since 1995. According to SoFi, Technisys' growth is accelerating, but its prospects of $800 million cumulative revenue might be considered too ambitious.
Following SoFi's move, the stock plunged 3%, met with skepticism and frantic selling by investors. It's not yet clear why the stock lost so much ground after a move that should've been considered complimentary.
IN CONCLUSION
SoFi has a Moderate Buy consensus rating based on 8 Buys, and 3 Holds. The average SoFi price target of $18.86 implies an upside potential of $73.8%. Though the company is trading at a level that implies buying in, there's potential for it to go either way.
As announced 24 January 2022, SoFi plans to release its fourth quarter and fiscal year 2021 results after the close of the financial markets on Tuesday, 1 March 2022.
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