The merchant processor iPayment Inc. has received a buyout offer from its chairman and chief executive.
The Nashville company said Monday that Gregory S. Daily offered $38 a share and intends to take iPayment private.
iPayment's stock, which had been trading as high as $50 in December, has dropped to the low $30 range. Analysts say they are concerned about the company's revenue growth (iPayment processes credit and debit card payments, primarily for small merchants).
After the announcement of Mr. Daily's offer, the stock jumped to about $38.
iPayment said in the press release that Mr. Daily had created a company that would acquire the shares. The release noted that his proposal is subject to a few conditions, notably whether he can line up financing and whether enough other iPayment executives will participate in the transaction.
The iPayment board has established a committee to study the proposal. The company did not return phone calls Monday.
Robert Dodd, an analyst with Morgan Keegan, said Monday that he was concerned about iPayment's revenue. In the past two years iPayment has bought two portfolios of small merchant customers from First Data Corp., a $55 million portfolio in December 2003 and a $130 million portfolio in December 2004.
Mr. Dodd said those acquisitions may be driving down the stock price. Before it bought the $55 million First Data portfolio, iPayment had organic revenue growth in the high teens to low 20s, he said. This year, with that portfolio on the books for more than a year, the growth will be around 10%, he said.
Next year, with the second portfolio on the books for a year, organic revenue growth will slow to about 5%, Mr. Dodd said. "Small merchants just go out of business more often than big merchants," he said. "Your risk of merchant attrition is higher."
Gregory Smith, a director for Merrill Lynch, wrote in a research note Monday that the First Data portfolios are "dragging down the company's organic growth rate."
Matthew J. McCormack, an analyst at Friedman, Billings, Ramsey & Co. Inc., wrote that "Mr. Daily has the relationships and resources necessary to finance the deal. If the deal is consummated, we estimate that Mr. Daily will be getting a bargain."
