Payments start-up Change Financial will take over the Australian and New Zealand businesses of failed German payments processing business Wirecard. It is a risky move, as Change must take on Wirecard’s liabilities and may well be up for “fines and penalties”.
The company announced on Friday that it has entered into a binding agreement to acquire the business assets of Wirecard NZ Ltd and Wirecard Australia in a deal worth A$7.8 million.
The acquisition will be funded with capital raised in a placement and entitlement offer.
The Wirecard businesses include a card management platform (issuing and processing), a simulator system for testing transactions and a mobile payments platform.
Change Financial said the Wirecard businesses earned A$15.4 million of revenue in the year to June, including $9.3 million of recurring revenue.
The client base includes the big Australian banks, major Australian supermarkets, Asian and South American banks and fintechs.
A source said that based on the Australian and New Zealand Wirecard revenue figures reported by Change Financial, the business has not achieved much growth in recent years.
Wirecard NZ and its subsidiary Wirecard Australia went into voluntary administration in June, following the collapse of the German parent, which faces questions about an accounting scandal that saw €1.9 billion go missing from its balance sheet.
The parent company is also being investigated for possible money laundering offences.
Wirecard’s UK business was ordered to stop operations temporarily last month by the Financial Conduct Authority, which said it needed to ensure customers’ funds were protected.
Change Financial has disclosed that “following completion of the acquisition, Change will be responsible for certain outstanding liabilities that Wirecard has incurred prior to the acquisition that are to be acquired by Change under the acquisition in respect of the Wirecard assets, which may be greater than expected, for which insurance may not be available and for which Change may not have post-acquisition recourse under the agreement for the acquisition, and which may result in Change being liable for fines and penalties or subject to other sanctions.
“Such liabilities may include unregistered security interests or other encumbrances over some if the Wirecard assets.
“Such liabilities may adversely affect the financial performance or position of Change and even put at risk the group’s capacity to carry on its business, either at all or in one or more of the geographic regions in which the group currently operates, and may be more costly than expected to remedy.”
Change Financial earned revenue of US$258,000 in the year to June and made a loss of $US$3.5 million. Its core business is payments processing and card issuing.
It is listed on the ASX but its business is conducted in the United States, where its partner bank is the Central Bank of Kansas City.
It has been in a development phase and completed the construction of its platform in 2019/20.
Its business model is to “capitalise on the world’s move to cashless, virtual and online payments” and it claims to offer “critical infrastructure” that connect banks with fintechs.
The acquisition will expand Change Financial’s range of offerings to include multi-currency services, virtual