Why Plusgrade Is Buying Points.com (PCOM) For $385 Million

By Amit Chowdhry ● May 9, 2022
  • Points.com Inc. (NASDAQ: PCOM) announced it is being acquired for $385 million. These are the details.

Points.com Inc. (NASDAQ: PCOM), a global leader in powering loyalty commerce, has announced that it has entered into an arrangement agreement pursuant to which a wholly-owned subsidiary of Plusgrade Parent L.P., a leading ancillary revenue platform for the global travel industry, will acquire all of the issued and outstanding common shares of the company for US$25.00 per common share in cash (equivalent to C$32.21 assuming a 1.2882 exchange rate as per the Bank of Canada May 6 noon rate) by way of a statutory plan of arrangement under the Canada Business Corporations Act. The deal values Points at about US$385 million on an equity value basis and the Consideration represents a 52% premium to the 20–day volume-weighted average price of the company’s common shares on the Toronto Stock Exchange (“TSX”) for the period ending May 6, 2022.

Deal Highlights

Attractive Premium for Shareholders – Consideration of US$25.00 per common share represents a 45% premium to Points’ closing price on the TSX on May 6, 2022, and a 52% premium to the 20–day volume-weighted average per common share on the TSX for the period ending on May 6, 2022.

Certainty of Value and Liquidity – The US$25.00 per common share cash consideration to holders of Points common shares (“Shareholders”) provides certainty of value and immediate liquidity.

Limited Conditions to Closing – Plusgrade’s obligation to complete the deal is subject to a limited number of closing conditions that the board of directors believes are reasonable in the circumstances. Completion of the deal is not subject to any financing condition. Plusgrade is a credible purchaser with significant financial backing from reputable institutional investors, Investissements Novacap Inc. (“Novacap”) and Caisse de dépôt et placement du Québec (CDPQ).

Value Supported by Two Fairness Opinions – Each of RBC Capital Markets and Blair Franklin Capital Partners Inc. provided an opinion to the Board stating that, subject to the assumptions, limitations, and qualifications to be set out in the fairness opinion, as of May 6, 2022, the consideration to be received under the deal is fair, from a financial point to view, to the shareholders.

Deal Summary

Under the terms of the deal, Shareholders will receive US$25.00 in cash per common share held. And the deal will be subject to the approval of (i) at least 66 2/3% of the votes cast by Shareholders at a special meeting of the Shareholders; and (ii) a simple majority of the votes cast by Shareholders at the Meeting, excluding votes from certain Shareholders, as required under Multilateral Instrument 61-101 – Protection of Minority Securityholders in Special Transactions. The Meeting is expected to be held in late June.

In connection with the deal, officers and directors of Points collectively holding approximately 6.7% of the issued and outstanding common shares have entered into support and voting agreements with the Purchaser, pursuant to which they have agreed, among other things, to vote their common shares in favor of the deal. The Purchaser will fund the deal with a combination of equity from Novacap and CDPQ and debt from recognized financial institutions. The deal is not subject to a financing condition.

In addition to shareholder approval, the deal is subject to approval by the Ontario Superior Court of Justice (Commercial List) and certain other regulatory approvals as well as the satisfaction of certain other customary closing conditions. The Arrangement Agreement contains customary non-solicitation, “fiduciary out” and “right to match” provisions, as well as a C$18 million termination fee payable to the Purchaser if the Arrangement Agreement is terminated in certain circumstances.

The Arrangement Agreement also provides for payment by the Purchaser of a reverse termination fee to Points of C$27 million and C$45 million if the Arrangement Agreement is terminated in certain specified circumstances, with the fee payable depending on the circumstances of the termination.

KEY QUOTES:

“We are thrilled to be joining forces with Plusgrade in what will become a truly global leader and provider of value-adding and revenue-generating services for partners in the airline, hospitality, rail and financial services industries. Additionally, we have benefitted from a supportive group of shareholders over the past number of years and are pleased to have created this compelling outcome.”

– Rob MacLean, Chief Executive Officer of Points

“Points’ board of directors and senior management team are in full support of this transaction, which we believe comes at an attractive valuation that maximizes the value we create for our Shareholders. The all-cash consideration of US$25.00 per share represents a significant premium to our current and historic trading price, and it reflects the continued operating performance strength and strategic synergies we expect to drive with Plusgrade.”

– David Adams, Chairman of Points’ Board of Directors

“The combination of our two companies provides a unique opportunity to bring together two Canadian success stories that are each leading operators in different aspects of ancillary revenue and loyalty commerce, to create something much greater, for the benefit of our partners in the global travel industry, and ultimately for the benefit of the traveler. The strong cultural fit between our teams will act as a catalyst for future combined growth.”

– Ken Harris, Founder and Chief Executive Officer of Plusgrade