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Pipeline Data Buys COCARD, Merges with Innovative Resource Alliance |
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Pipeline Data says it has signed a binding letter of intent to acquire Innovative
Resource Alliance, the parent corporation of TenderCard, a gift,
loyalty and stored value solutions provider with more than 12,000 merchants based in
Falmouth, Massachusetts and Merchant Services Network, a retail merchant
services provider based in West Palm Beach, Florida, in exchange for up to 25.7
million shares of Pipeline Data Common Stock, subject to certain earn in
provisions. In addition to its current portfolio of 5,000 merchants, IRA has
initiated negotiations and executed letters of intent to purchase for cash
portfolios totaling approximately 15,000 merchants.
As merged, Pipeline
Data/IRA will acquire COCARD(R) Marketing Group, LLC ("COCARD"), a Nashville,
Tennessee-based merchant services provider catering primarily to small and
medium-sized retail accounts. COCARD currently services over 25,000 merchants.
The Definitive Merger Agreement to acquire COCARD for approximately $101 million
in cash was entered into on October 22, 2007.
Privately held IRA
has significant expertise in gift and loyalty card processing programs, as well
as in providing electronic payment processing solutions to small and
medium-sized retail merchants. Aaron Sorgman, IRA's chairman and CEO, will join
the board of directors of Pipeline Data. COCARD is a cooperative of bankcard
professionals with 48 members and approximately 600 sales representatives
located in over 60 offices throughout the continental U.S. The company
is headed by Rick Pylant and Jon Stevens, both of whom will remain with COCARD
and join Pipeline's executive team.
Pipeline Data has
received a senior secured debt proposal of $160 million for the funding of the
transactions led by a major financial institution. Pipeline will also implement
an equity component with a private sale of securities to complete its funding
requirements. The funds will reduce Pipeline's current cost of capital and
enable the company to properly rationalize its balance sheet in coordination
with the transaction. All of the above transactions are subject to due diligence
by the interested parties and a vote of Pipeline Data shareholders. At present,
over 70% of Pipeline shareholders have indicated in favor of the IRA merger and
COCARD acquisition. The shareholders of IRA and COCARD have already approved the
transactions, which are expected to be finalized simultaneously. A closing date
of no later than January 31, 2008 is anticipated.
The newly combined
Pipeline Data, IRA and COCARD is projected to have pro-forma 2007 Revenue in
excess of $95 million, Gross Profit in excess of $55 million and EBITDA in
excess of $30 million. There will be an estimated 80-90 million shares issued
and outstanding after the transaction is completed, depending on a number of
factors including shares that may be sold privately to increase underlying
equity and reduce overall leverage. As a result of the transaction, it is
expected that Pipeline will have available working capital of up to $20 million
to further its organic growth and acquisition
initiatives.
MacAllister Smith,
CEO of Pipeline Data, stated "The combination of these transactions constitutes
a dramatic and positive development in the evolution of Pipeline Data. With a
greatly expanded base of more than 70,000 merchants immediately upon the close
of the transaction and more than $30 million in projected 2007 EBITDA, we are
now positioned to become a world-class payments company. The excellent long-term
results IRA/COCARD have achieved in direct retail sales will combine with
Pipeline's strong technology focus and established capabilities in e-commerce
sales to provide us with the scale, distribution and depth of product offerings
required to assume a leadership position in the U.S. payments
processing market."
For more
information, please visit TenderCard at www.tendercard.net, Merchant Services
Network at www.msnps.com and COCARD, at
www.cocard.net.
About Pipeline Data
Inc.
Pipeline Data Inc.
(PPDA) is a value-added provider of merchant payment processing services and
other related software products. The Company currently delivers credit and debit
card-based payment processing and related services to over 40,000 small to
medium-sized merchants who operate either in a physical "brick and mortar"
business environment or over the Internet. Pipeline's payment processing
services enable merchants to process traditional card-present, or "swipe"
transactions, as well as card-not-present transactions. For more information,
please visit www.pipelinedata.com.
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