Will Bipin Shah's $179M deal trim 'rip-off' card fees?
Universal Payment Acquisitions' 'one-stop' electronic payment service targets small businesses, low-wage workers
Will Bipin Shah's $179M deal trim 'rip-off' card fees?
Joseph N. DiStefano
(Updated with analyst comment) Main Line electronic-payments pioneer Bipin Shah's Universal Payment Solutions Acquisition Corp. has agreed to buy Allentown-based AD Computer Corp. and Payroll Tax Filing Services Inc.; Visa-MasterCard processor Jet Pay LLC of Dallas, and Electronic Merchant Systems of Cleveland, for a total of up to $179 million in cash and stock, in an effort to build a one-stop payment-services company targeting small businesses and their low-wage workers. "Bipin's strategy to integrate different but related payment services under one roof is brilliant," ex-MasterCard executive Jim Shanahan, a Chester County-based payments consultant who has worked with Shah, told me. "He will be able to not only offer a better mousetrap, but a cheaper one. "
"I've always wanted to service small businesses," says Shah, of Rosemont. He made previous fortunes building electronic payment networks MAC Card (now First Data Corp.'s BuyPass), Genpass (now part of US Bank) and Gensar (Chase Paymentech). "It's been so fragmented, with different companies providing different services. I'm going to connect them all." Publicly-traded Universal, which raised more than $70 million in a share sale last year and has borrowed another $60 milllion from banks, will pay $104 million in cash for the three companies, plus $38 milllion in newly issued shares, with up to $25 million in additional cash and stock payments if the businesses meet financial targets. Universal projects sales of around $79 million this year, rising to $131 million in 2014. Net income is projected to rise from $10 million to $22 million over the same two years.
"Nobody does all these things for small businesses" and for "low-income workers, who are being ripped off by check cashing agencies and Western Union," Shah told me. "Paychecks, gift cards, sending money home to Mexcico or India by Western Union, getting a money order to pay a telephone bill -- think of all the fees they are currently paying. Well, they can get rid of all that. We'll supply them with a single piece of plastic they can use electronically. This will be like the MAC network, so they can get money everywhere." AD employs around 100 and expects to earn $4 million this year. EMS employs 250 and will earn around $11 million. JetPay employs 50, and has sales totalling around $18 million a year, according to Shah. He employs 4 at his Radnor Financail Service headquarters.
Shah's previous companies were based in Philadelphia "We will add people as soon as the transaction is approved" by the Securities and Exchange Commission, he added. "We are putting our team back together."
It sounds nice, until he realizes all the extra cash that could be pulled in by the fees. I expect it to be gone, and over the years to gradually come back. No business savvy person gives away revenue.— verve- Looks like Bipin has lots of money to throw around. And he has 4 employees? Hmmmm....— Ralph 1
