WEX Boosts Services, Expands Operations With Latest Deal

WEX Inc. (NYSE:WEX) recently completed the acquisition of Electronics Funds Source LLC (“EFS”) from Warburg Pincus. With the deal, EFS has now become a wholly-owned subsidiary of WEX. The acquirer will also be able to extend its presence in the large and mid-sized over-the-road (“OTR”) fleet segment through this transaction.

The deal which cost WEX $1.1 billion in cash will provide around $275 in present value of tax benefits. In addition, the acquirer issued about 4.0 million shares to investment funds associated with Warburg Pincus. Interestingly, the issuance was a consideration for the EFS acquisition.

EFS offers modified corporate payment solutions for fleet and corporate customers. The company remains focused on the large and mid-sized OTR fleet segments. The buyout will integrate the top-notch offerings and complementary footprint of the companies.

The acquirer intends to start merging EFS into its global network soon. Further, WEX is particularly upbeat about the combination of the strengths of the companies. This will allow the acquirer to boost the functionality and services offered to OTR customers and mixed fleets in North America. This apart, the acquirer expects the deal to further enhance its business.

The customer orientation and product portfolio of the acquired company will be a perfect fit for WEX. The transaction will not only help in the operational expansion of the buyer but also cater to the needs of all fleets more effectively. The acquirer’s platform will get a substantial boost with functional expansion in controls, permitting, fuel price analytics and mobile account maintenance from EFS’ technology.

EFS’ solutions will broaden the acquirer’s corporate payments product offering alongside the addition of a mixture of corporate card options including a single, multi-purpose card. The acquisition will allow the combined entity to forecast industry trends, innovate its offering and offer customized expertise and service to fleet and corporate clients much more efficiently. Moreover, the transaction will support the acquirer’s earnings and minimize its exposure to fuel price sensitivity.

WEX anticipates the transaction to be accretive to adjusted net income over the next 12 months. Given the time of the completion of the deal, the acquisition is not expected to have a material impact on the previously issued guidance for the remainder of 2016. The acquirer intends to provide details on deal synergies and accretion at the time of reporting its second-quarter results, subsequent to the completion of the transaction.

Zacks Rank and Stocks to Consider

Currently, WEX carries a Zacks Rank #3 (Hold). Some better-ranked stocks are Total System Services, Inc. (NYSE:TSS) , Fidelity National Information Services, Inc. (NYSE:FIS) and Global Payments Inc. (NYSE:GPN) . Each of these stocks holds a Zacks Rank #2 (Buy).