It’s been a month since financial services veteran Bill Foley announced the combination of his Foley Trasimene Acquisition II Corp. (NYSE:BFT) special purpose acquisition company (SPAC) with Paysafe Group Holdings Limited, a privately-held payments platform controlled by private equity. Long term, if you own BFT stock, Foley’s going to deliver for you.
Here’s why I feel this way.
BFT Stock Is Foley’s Fourth SPAC
Either Bill Foley already had Paysafe in mind when he listed BFT in August, raising $1.5 billion in the process, one of the largest SPAC deals in 2020 — the average SPAC IPO raised $337 million in 2020 — or at the very least, he and the rest of his management team had a pretty good idea where to look to close a deal quickly.
As I said, Foley Trasimene Acquisition II is Foley’s fourth SPAC.
His first was CF Corp. in May 2016 when he raised $600 million in association with former Blackstone Group (NYSE:BX) dealmaker Chinh Chu. CF Corp. completed its merger transaction with Fidelity & Guaranty Life on Nov. 30, 2017, in a deal valued at $2.24 billion, including the assumption of debt.
On June 1, 2020, Fidelity & Guaranty Life was acquired by Fidelity National Financial (NYSE:FNF) in June 2020 for $3.25 billion, including the assumption of $550 million in debt. Fidelity & Guaranty shareholders had the option to receive $12.50 in cash or 0.2558 shares of FNF for each share held.
Not surprisingly, Bill Foley owned 3.2% of Fidelity National stock before the completion of the acquisition. Foley invested approximately $26.8 million in CF founder shares and warrants. The owner of the Las Vegas Knights NHL hockey team is said to have made $138 million (515%) on his original SPAC investment.
But there’s more.
In May 2020, Foley raised $900 million for Foley Trasimene Acquisition (NYSE:WPF). It’s still looking for a combination. He did that one with a lot of the same people involved in his first SPAC in 2016, including Richard Massey, who serves as chief executive officer of the SPAC; his day job is CEO of Cannae Holdings (NYSE:CNNE), another Foley vehicle which holds some of his other investments including Ceridian HCM Holding (NYSE:CDAY) and Dun & Bradstreet Holdings (NYSE:DNB).
Foley’s third SPAC was a month later in June 2020, when he raised $450 million through Trebia Acquisition (NYSE:TREB). It has not completed a combination to date.
This brings us to Foley Trasimene Acquisition II.
A Massive Deal
When you raise $1.5 billion from a SPAC, the size of the target naturally grows exponentially. In the case of Paysafe, the pro-forma enterprise value of $9 upon the combination’s closing in the first quarter of 2021 will include an additional $2 billion in private placement investment from investors, including several of Foley’s other companies.
Based on this valuation, which includes approximately $1.81 billion in debt, Paysafe will have pro forma net leverage of 3.6 times its 2021 estimated organic earnings before interest, taxes, depreciation and amortization.
Paysafe is expected to process more than $103 billion in payments in 2021 and $1.5 billion in organic revenue with a significant portion from the iGaming industry, which continues to grow rapidly in the U.S.
Post-closing, BFT shareholders will own 22.5% of the merged entity, with the PIPE investors holding 27.8%, Paysafe’s existing shareholders owning the biggest chunk of 45.7%, and Foley Trasimene’s founders owning the remaining 4.0%.
As Foley says, “My whole history and career has been around acquiring companies and fixing companies,” Bloomberg reported in October 2020.
In January 2020, I picked Foley’s Cannae Holdings as one of seven stocks that could double for a second consecutive year. While it didn’t pull off the feat — it had a 2020 total return of 19.0% — Bill Foley remains among the better capital allocators in America.
If anyone can deliver value for BFT shareholders, I’m sure he’s the one to do it.
The Bottom Line
Like any SPAC, the long-term value proposition for shareholders is combining with a company that’s capable of growth. The cash it brings to the table is the price of admission.
Foley’s four-point plan for Paysafe includes integrating its platform globally, delivering increased organic revenue, capturing more of the U.S. iGaming market, and using its size to consolidate smaller fintech players worldwide.
Ultimately, I believe patient investors will reap the rewards of Foley’s combination with Paysafe, but you shouldn’t expect its share price to double once the deal closes.
If it does, great, but I would look for a double over the next two to three years because it’s not a sure thing.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
