PayPal’s offer for Tio Networks is a fair one, says Haywood

Yesterday’s surprise offer from PayPal to buy Vancouver-based fintech Tio Networks (TSXV:TNC) wasn’t a huge bump over the company’s current share price but it was a fair deal, says Haywood Securities analyst Pardeep Sangha.

Yesterday, Tio announced it would sell itself to PayPal for $3.35 (US) $2.56 per share in cash, a deal worth about $304-million (US) $233-million.

“We founded Tio to make speed and access part of the bill payment experience for the underserved, and we believe that we have created affordable products to serve the needs of all customers,” said CEO Hamed Shahbazi. “Our mission fits perfectly with PayPal’s vision to democratize money. As part of the PayPal team, we believe we will accelerate our growth through expanded distribution and continue increasing access to more billers and services.”

Sangha says while this isn’t a blow-your-mind premium, it is a fair deal for Tio shareholders. The analyst today changed his rating on Tio Networks from “Buy” to “Tender” and increased his one-year target price from $3.25 to $3.35.

“We recommend investors to Tender their shares to the PayPal takeout offer,” says the analyst. “Although the acquisition price of $3.35/share only represents a 6.7% premium to yesterday’s close; we believe it is a fair value given that the purchase price represents a premium of 25.2% to Tio’s 90-trading day volume-weighted average price. This also represents a 22.6% premium to the 20-trading day volume-weighted average price as of January 9, 2017, the trading day immediately preceding the date when Tio entered into exclusive negotiations with PayPal. The transaction has been approved by the board of directors of each of Tio and Paypal. Tio shareholders, directors and officers (including funds managed by Board members) representing approximately 50.4% of the outstanding common shares have agreed to vote in favor of the transaction. Tio is expected to hold a special meeting of shareholder in April 2017, but the acquisition isn’t expected to close until the second half of 2017 due to regulatory licensing requirements.”

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PayPal CEO Dan Schulman said Tio would be a key cog in helping the world’s most famous fintech access billions of the world’s “unbanked”, people who do not use traditional financial services.

“By acquiring Tio and integrating bill payment into our global payments platform, PayPal adds another key service in our efforts to become a part of a consumer’s everyday financial life,” he said. “Worldwide, more than two billion people do not have affordable access to basic financial services, making it difficult and expensive for consumers to carry out basic financial tasks, including bill payment. Tio’s digital platform and physical network of agent locations make paying bills simpler, faster and more affordable. We are excited by the opportunity to extend this valuable service to our existing customers and welcome new billers and customers to PayPal.”