PAR Technology Buys Punchh For $500M; Shares Pop 25.5%

Shares of PAR Technology Corporation jumped 25.5% after the global provider of restaurant software announced the acquisition of Punchh, Inc., a provider of loyalty and guest engagement solutions. The value of the deal included $500 million paid in cash and shares of PAR Technology stock to shareholders of Punchh.

PAR Technology (PAR) said that the acquisition will make the company a unified commerce cloud platform for enterprise restaurants and position it well in providing integrated point-of-sale, back office, payment, and guest engagement solutions.

The cash component of the acquisition price was financed through a combination of equity and debt, which included sale proceeds of $160 million of PAR common stock to PAR Act III, and to funds and accounts advised by T. Rowe Price Associates. Furthermore, a senior secured term loan under a credit agreement was raised worth $180 million. (See PAR Technology stock analysis on TipRanks)

PAR Technology CEO Savneet Singh said, “In our view, Punchh is the pre-eminent loyalty and CRM SaaS provider to enterprise restaurants. They boast a blue-chip roster of customers, industry-leading growth, 100%+ net dollar retention and very high customer NPS scores. Punchh’s highly experienced team are among the industry’s best – we’re beyond excited to have them join us on our ambitious journey. I am also pleased to report that the combined companies, on a pro-forma basis, at the end of 2020, would have generated $65 million in run-rate ARR, while maintaining our growth and net dollar retention.”

Following the deal, BTIG analyst Mark Palmer reiterated a Buy rating and increased the price target to $110 (40.7% upside potential) from $105 “based on a sum-of-the-parts analysis including 15x FY23E ARR of $189.3mm and 1x the FY23E revenues from the rest of the business of $214.3mm.”

Palmer said, “While PAR’s shares reacted positively to the Punchh acquisition announcement, we believe the stock is undervalued considering its long runway for growth.”

“While the implied multiple on the deal is healthy,” the analyst believes “the addition of Punchh represents a significant step in PAR’s efforts to create an end-to-end technology solution for enterprise restaurants stemming from a unified data source. Moreover, we believe Punchh provides PAR with significant cross-selling opportunities.”

Shares have skyrocketed 430.6% over the past year, while Wall Street analysts are still bullish about the stock. The Strong Buy consensus rating boasts 5 unanimous Buy recommendations. Looking ahead, the average analyst price target stands at $101.75, putting the upside potential at 30.1% over the next 12 months.

TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on PAR Technology, with 8.9% of investors increasing their exposure to PAR stock over the past 30 days.

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