Financial technology company Katapult Holding Inc. has agreed to become a publicly traded company through a merger with FinServ Acquisition Corp., a special purpose acquisition company.
Katapult is an e-commerce point-of-sale purchase options provider for nonprime U.S. consumers. It serves more than 150 merchants and 1.4 million consumers.
Under the terms of the proposed transaction, FinServ will merge with Katapult at a pro forma combined enterprise value of approximately $1 billion and equity value of $962 million, representing enterprise value/EBITDA multiples of 14.1x and 6.6x projected EBITDA for 2021 and 2022, respectively. The total consideration paid to Katapult's existing shareholders will be $833 million.
Cash proceeds of the transaction will fund up to $325 million of cash consideration to Katapult's existing shareholders and $50 million of cash to its balance sheet.
The cash components will be funded by FinServ's cash in trust of $250 million as well as a $150 million private placement of common stock at $10 per share from various institutional investors, led by Tiger Global Management LLC and Neuberger Berman Funds, that will close concurrently with the merger. The balance of the consideration will consist of equity in the combined company. Existing Katapult equity holders have the potential to receive an earnout for additional shares of equity if certain price targets are met. Katapult's current equity holders will own approximately 50% of the pro forma company, assuming no cash redemptions.
When the deal closes, the combined company will operate as Katapult and is expected to trade on Nasdaq under the new symbol KPLT.
The transaction is expected to close during the first half of 2021 and remains subject to approval by FinServ stockholders, the expiration of the Hart–Scott–Rodino Act waiting period, and other customary closing conditions.
PJT Partners is acting as financial adviser to Katapult with DLA Piper LLP (US) acting as legal counsel. Barclays is acting as financial adviser to FinServ with Kirkland & Ellis acting as legal counsel.
Barclays and PJT Partners are acting as placement agents with respect to the private placement. Barclays and Cantor Fitzgerald are acting as capital markets advisers to FinServ. Paul Hastings LLP is acting as placement agent counsel.