THE BUZZ Some bodies accept a adroitness for acrimonious out gifts, but for a lot of Americans it’s a absolute challenge. When in doubt, there’s consistently an accessible option: Buy a allowance agenda that lets them aces their own.
Apparently, added and added Americans are demography this option. Safeway (SWY) formed a abstracted analysis to administer its own gift-card business 12 years ago, and that’s accepted so acknowledged that acquirement has about tripled aloof back 2008. Now it’s spinning off the assemblage as a abstracted company, Blackhawk Network, admitting it will absorb majority ownership.
Blackhawk is about a acquittal processor, abundant like the companies that handle prepaid buzz cards — which is, in fact, one of its businesses. So it’s conceivably not hasty that a grocery alternation considers it a noncore business. But its evolution aural Safeway has helped accord it an astronomic attendance in its niche, and additionally appear to bazaar afterwards the ache for basic that has pushed abounding contempo IPOs out to bazaar with all-a-quiver antithesis sheets.
“HAWK is a arch aggregation in its bazaar articulation and should be bought on the IPO,” wrote IPO Desktop’s Francis Gaskins in a address Monday. “Its approaching is bright.
THE COMPANY Safeway formed Blackhawk in 2001, but by now the ancestor alone provides about 12% of Blackhawk’s revenue. It now provides allowance cards to added grocery chains such as Kroger (KR) and Supervalu (SVU), and a array of added retailers, including Bed Bath & Beyond (BBBY), J.C. Penney (JCP) and Staples (SPLS). These aggregate Blackhawk’s administration partners.
“Closed loop” allowance cards can be spent alone on accurate brands, such as Amazon (AMZN), Apple ‘s (AAPL) iTunes, Macy’s (M) and Starbucks (SBUX). Blackhawk makes money by charging commissions called to the amount amount on the card, which it again shares with its administration partners. It draws about 70% of its acquirement this way.
The aggregation additionally offers “open loop” allowance cards branded by American Express (AXP), Visa (V) and MasterCard (MA). These can be spent about anywhere, admitting they do usually accept time limits. Blackhawk is paid administration fees by the arising bank, and additionally takes a cut of the user activation fee and the merchant altering fees. This provides 14% of revenue.
About 8% of acquirement comes from prepaid buzz cards, through relationships with AT&T (T), Sprint (S) and Verizon (VZ) amid others. Here Blackhawk additionally accuse a agency based on amount value, additional it resells handsets at a markup to its administration partners.
The blow of the company’s money comes from reloadable prepaid cards from GreenDot (GDOT) and NetSpend (NTSP), as able-bodied as resale of secondhand allowance cards it buys from consumers.
RISKS/CHALLENGES The end of Blackhawk’s abutment with Safeway will beggarly a concise hit to its basal line. At the alpha of this year, Safeway is demography a beyond cut of commissions, added in band with what added administration ally take, which delivered a actual hit to basic Q1 income. Additionally acid into Q1 assets was an access in sales and business spending, which its announcement did not absolutely explain.
Blackhawk’s relationships are everything, and it’s abnormally accessible on the administration end back the top four administration ally annual for added than a third of its business. Any disruption in these affairs would accept a ample appulse on Blackhawk, as we accept already apparent with Safeway.
The aggregation faces antagonism from Interactive Communications International (InComm) and Euronet Worldwide (EEFT).
Quarterly after-effects are awful seasonal, with best of the money advancing in the December arcade season. That makes it accessible to contest at that time of year, such as bad acclimate or a banking downturn.
Recent banking regulations such as the Dodd-Frank Act accept acute analysis on articles like the open-loop and prepaid banking cards.
THE RESULTS Last year’s acquirement rose 27.6% to $959.1 million, while accumulation climbed 33% to 93 cents a share. In the fourth quarter, sales acquired 27.4% to $453 million, while accumulation rose 29% to $36.2 million.
Preliminary Q1 numbers appearance a 22.1% sales access to $151.5 million, but a 50% bead in adapted net income, for affidavit declared above.
USE OF PROCEEDS Blackhawk expects to accession $210 actor from its alms of 10 actor shares, but it won’t see any of the money, which will end up with Safeway and added stockholders.
THE MANAGEMENT William Tauscher Chief controlling and administrator Became administrator in 2009 and CEO the aing year afterwards confined on Safeway’s lath of admiral back 1998. From 2004 to 2010, he headed Vertical Communications. Back 1986, he’s been a managing affiliate of investment-management close the Tauscher Group. He holds a B.S. in authoritative sciences from Yale University.
Talbott Roche President Joined in 2001 and accomplished her accepted position in 2010. Before that, she spent a year as a branding adviser at Landor Associates and four years in assorted positions at News Corp. (NWSA) . She holds a B.A. in economics from Stanford University.
Daniel Dmochowski President, International Joined in 2001 and accomplished his accepted position in 2010. He holds a B.S. in agronomical economics from Cornell University.
Blackhawk Network Holdings Pleasanton, Calif.
(925) 226-9990 blackhawknetwork.com Lead underwriters: Goldman Sachs, BofA Merrill Lynch, Citigroup, Deutsche Coffer Alms price: $20-$22 Expected date: anniversary of April 15 Ticker: HAWK
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