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.

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. CashStar increases Blackhawk’s offerings and deepens merchant relationships, while extending Blackhawk’s strength in the third-party and incentives businesses to the large first-party market. In addition, the acquisition provides retailers and distributors with more powerful options in mobile and digital distribution—two of the fastest-growing gift card segments in the industry today.

“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,” said Talbott Roche, CEO and president of Blackhawk Network. “With the addition of CashStar, Blackhawk is now a leading provider in the fast growing first-party digital market. 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.”

“Joining forces with Blackhawk will help us deliver even more powerful capabilities and new revenue opportunities for our clients and partners,” said Ben Kaplan, CEO and president of CashStar. “Together, we can provide merchants with unified end-to-end solutions for B2B and B2C gift card distribution. The combination of our platform and Blackhawk’s product breadth and global reach creates innovative new applications for branded value and mobile payments. We couldn’t be more excited.”

CashStar becomes part of Blackhawk’s digital and incentives businesses. Kaplan continues to manage the business and reports directly to Blackhawk’s General Manager of Digital and Incentives, David Jones.

“We’re looking forward to leveraging the synergies across our businesses and technologies to offer comprehensive gift card solutions for a brand to sell directly to consumers or businesses through digital channels,” said Jones. “We are committed to maintaining CashStar’s merchant-centric culture that has earned the company so much success to-date. As we integrate their SaaS platforms and organization into Blackhawk, we will provide the same exceptional service and partnership that Blackhawk and CashStar customers have come to expect.”

Transaction Details
Blackhawk acquired CashStar for approximately $175 million in cash. “We expect the acquisition 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,” said 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. 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.”