Shift4 gets credit for upsized US$875m mandatory
Shift4 Payments raised an upsized US$875m late on Wednesday from the sale of a mandatory convertible preferred security to help fund its pending acquisition of Global Blue, underpinning a HY bond issue and new bank loan that will fill out the financing package.
Goldman Sachs, Citigroup, Wells Fargo, Barclays, Citizens and Santander priced the three-year mandatory at a 6% dividend and 25% conversion premium, the aggressive ends of the 6%–6.5% and 20%–25% price talk marketed on Wednesday. The banks upsized the offering from the US$750m target at launch.
“Investors like this company and the space,” one banker involved in the offering told IFR. “If the world hadn’t gone weird, this would be standard M&A financing.”
In February, the financial payments provider agreed to the US$2.75bn purchase of Global Blue with an eye to growing its business internationally. Since then, US president Donald Trump imposed tariffs, unsettling the financial markets and leading to a sell-off in Shift4’s shares and the widening of its credit spreads.
Shift4’s first-quarter results released on Tuesday assuaged investor concerns over the impact of tariffs on global consumer spending.
The company generated US$168.5m of adjusted Ebitda, topping the US$164m analysts had expected, and grew gross revenues less network fees by nearly 40% to US$368.5m, prompting it to increase full-year 2025 guidance to US$840m–$865m and US$1.66bn–$1.73bn.
“Investor sentiment skewed negative into the print given ongoing frustration with inconsistent messaging, difficulty assessing the building block of growth and concerns around a more uncertain macro environment,” analysts at Morgan Stanley wrote in a note to clients following the first-quarter earnings release.
Shift4 shares soared 12.8% Tuesday post-earnings to US$89.86 before falling 9% while the mandatory issue was being marketed on Wednesday to US$81.80. That is down from a high of US$127.50 in February, before the acquisition of Global Blue was agreed.
The mandatory obliges investors to convert into a minimum of 855,000 shares and a maximum of 1.1m in three years at US$81.80–$102.25. Investors are giving up upside participation up to a 25% premium in exchange for a 6% dividend. Shift4 does not pay a dividend.
“The dividend is a bit high by historical standards, but we are in a higher rate environment so investors need to be compensated,” said a second banker.
Mandatory convertible preferreds get 100% equity credit from the credit rating agencies.
Shift4 shifted focus on Thursday to a €680m (US$770m) eight-year HY bond issue after securing a new US$1bn term loan B. The combined proceeds fund the US$2bn cash purchase price for Global Blue as well as refinancing US$660m of debt being assumed ahead of the expected deal closing early in the third quarter.
Ironically, Shift4 took advantage of a low share price to buy back US$64m worth of stock in the first quarter.
Shift4 spent US$62.9m in the first quarter to buy back stock at an average price of US$91.68.
“We couldn’t ignore the price of our equity in the past few months,” Shift4 chief strategy officer Taylor Lauber said on Tuesday's first-quarter earnings call. “Buybacks became a larger portion of how we think about capital allocation.”
Rook to Class A
In a separate but related move, Shift4's departing CEO, Jared Isaacman, received US$118m of the mandatory convertible preferred, plus US$90m in cash, through a concurrent private placement (in addition to the mandatory). The US$198m payout dissolves tax obligations the company owed Isaacman as part of tax receivable agreements.
Isaacman, who founded Shift4 in 1999 when he was just 16 years old, has been nominated by Trump to head NASA. Pending Senate confirmation, he has agreed to exchange all his 19.8m Class B and 1.35m Class C shares into A shares.
The TRA restructuring is being executed through the Rook special purpose vehicle.
Isaacman was not required by the Senate Ethics Committee to liquidate his stock, and he will remain Shift4’s largest shareholder with a 19% stake.
This nifty bit of engineering will relieve Shift4 of future tax payments totalling US$542m and will leave it with a single-share corporate structure.
“Net-net, this is a positive for the company,” said one of the bankers. “They are reducing their future tax obligations above and beyond what they would have owed. And they are simplifying their corporate structure in the process.”
For Shift4, Global Blue is the latest in a series of acquisitions to expand internationally, following the purchases last year of Revel Systems (point-of-sale terminals), Givex (loyalty rewards) and Eigen (hospitality payments).