U.S. fintech firm Fiserv will buy Canada’s Payfare in a $201.5-million deal as it looks to expand payments offerings for gig-economy workers, the companies said on Monday.
The transaction follows Payfare’s strategic review of its business, initiated shortly after it revealed that its agreement related to DoorDash’s DasherDirect card program would not be renewed beyond early 2025. The disclosure had wiped off 75 per cent of Payfare’s value in a day.
With the deal, Payfare will become the 10th of 20 Canadian technology companies that went public during a flurry of offerings from mid 2020 to late 2021 to reprivatize since prices crashed across the sector three years ago. Shares of many smaller tech companies still haven’t recovered. Several other more established TSX-listed tech companies have also been bought out in the past couple of years, while Montreal-based Lightspeed Commerce Inc., which went public in 2019, has been evaluating potential takeover bids as part of a strategic review launched earlier this year.
Fiserv’s offer values Payfare stock at $4, a 90 per cent premium to its last closing price, but is way below the stock price before the DoorDash announcement.
Acquiring Payfare will allow Fiserv to expand its footprint in a fast-growing market. Gig-economy workers often approach digital banking platforms for funds during unforeseen financial emergencies, especially if they lack enough savings.
The deal, expected to close in the first half of next year, could also mark one of the final undertakings by Fiserv CEO Frank Bisignano, who has been picked by President-elect Donald Trump to head the Social Security Administration.
Payfare’s partners include some of the most recognizable gig-economy platforms such as ride-hailing firms Uber and Lyft.
“The deal is consistent with Fiserv’s intent to lean into embedded finance,” TD Cowen analysts said.
“Fiserv has announced key wins in recent months and this acquisition will further its technology offering.”
The number of transactions processed by fintech providers, in partnership with employers, to allow employees early access to their wages grew more than 90 per cent year-over-year in 2022, according to an estimate by the Consumer Financial Protection Bureau in July.
Payfare’s shares climbed 78 per cent on Monday. They have declined nearly 66 per cent this year, while Fiserv has jumped 55 per cent.
With files from Sean Silcoff