Blackhawk Network Acquires CashStar for $175 Million

Blackhawk Network Inc., a global financial technology company, has acquired CashStar Inc., a gift card commerce solutions provider. The acquisition strengthens Blackhawk's position in the emerging digital gift card market and establishes Blackhawk as a leading provider in the fast-growing first-party digital gift card market. The first-party gift card market transaction dollar volume is estimated in excess of $100 billion, with digital being the fastest-growing segment of that market.

Blackhawk acquired CashStar for approximately $175 million in cash. The acquisition is expected to be at least earnings neutral in fiscal 2017 and meaningfully accretive after synergies in 2018, adding $12 million to $15 million in adjusted EBITDA, $3 million to $5 million in adjusted net income and $0.05 to $0.09 in adjusted EPS, according to Jerry Ulrich, Blackhawk's chief financial and administrative officer.

"In addition, it is projected to generate positive cash flow in 2018 and helps us gain leverage in our digital products category by accelerating topline growth. With projected 2018 Adjusted EBITDA margins above our corporate average, it's also consistent with our margin expansion objectives,” Ulrich adds. “We completed the acquisition using a combination of available cash and borrowings under our revolving credit facility while maintaining further borrowing capacity with a projected pro forma debt to EBITDA leverage ratio of approximately 3.8 at the end of our fiscal third quarter."

CashStar's commerce platform enables retailers to market, sell and distribute digital and plastic gift cards in the first-party digital card business, which is directly to consumers and businesses across a wide range of channels. With CashStar's flexible platform, merchants can use digital and physical gift cards to engage consumers throughout the customer lifecycle, including marketing and promotions, sales and customer service.

"The acquisition strategically enhances Blackhawk's ability to provide the right digital solutions to our partners to meet the changing needs of business customers and consumers," says Talbott Roche, CEO and president of Blackhawk Network. " Also, with CashStar margins projected in the range of 25 percent to 30 percent for fiscal 2018, Blackhawk maintains its focus on margin expansion. Finally, Blackhawk remains committed to optimizing capital allocation to enhance shareholder returns and will continue to evaluate acquisition candidates as well as potential share repurchases in the future."

Blackhawk will host a conference call and webcast to discuss transaction details on August 31, 2017, at 1 p.m. PDT/4 p.m. EDT. Hosting the call will be Blackhawk CEO and president, Talbott Roche; executive chairman, Bill Tauscher; and chief financial and administrative officer, Jerry Ulrich.