i3 Verticals to divest merchant payments business to Payroc in $440m deal

In a significant realignment of business strategy, i3 Verticals, Inc. (NASDAQ: IIIV) has agreed to sell its merchant of record payments business to Payroc WorldAccess, LLC for $440 million. The all-cash transaction, which includes i3 Verticals’ proprietary technology, is expected to close in the fiscal fourth quarter, subject to regulatory approvals and other customary closing conditions.

Following the divestiture, i3 Verticals will concentrate entirely on its core vertical market software business, specifically targeting the Public Sector, Education, and Healthcare markets. Greg Daily, Chairman and CEO of i3 Verticals, highlighted the strategic nature of this divestiture: “After the divestiture, we will be a pure vertical market software business focused entirely on these sectors. We have retained our payment facilitation platform, which is integral to our vertical software solutions.”

The transaction is poised to significantly strengthen i3 Verticals’ balance sheet. Proceeds from the sale will primarily be used to pay down debt, including potentially clearing the company’s 2023 Senior Secured Credit Facility. This financial restructuring is expected to reduce borrowing costs and increase capital available for future mergers and acquisitions, further supporting i3 Verticals’ growth strategy in its chosen verticals.

For Payroc, the acquisition is a strategic fit that enhances its already robust payment processing capabilities. “The i3 merchant business is an ideal fit for Payroc, and their values and goals align with ours,” said James Oberman, CEO of Payroc. This acquisition will allow Payroc to expand its omni-channel payments solutions and further develop its technology and service offerings.

The sale of the merchant of record payments business by i3 Verticals to Payroc represents a calculated strategy to refine the company’s focus on software solutions, while Payroc enhances its position in the payments industry. This move is indicative of the broader trends in the tech and financial services sectors, where companies increasingly seek to streamline operations and concentrate on core competencies.