Letter Addressing Board of Directors Regarding Buyout Concerns
To the Board of Directors,
Priority Technology Holdings, Inc.
c/o Corporate Secretary
2001 Westside Parkway, Suite 200
Alpharetta, GA 30004
Dear Members of the Board of Directors,
Steamboat Capital Partners LLC, along with its affiliates, holds ownership or manages entities that own a significant stake in Priority Technology Holdings. This positions us as one of the top five external shareholders. We feel compelled to voice our concerns regarding the recent proposed take-private offer from Chairman and CEO Thomas Priore.
Our firm became a key shareholder in Priority after meeting with Mr. Priore and CFO Tim O'Leary. During this meeting, we discussed how the current equity market valuation underrepresents the company’s strong growth potential, diverse business model, sound financial health, and impressive profit margins.
Our enthusiasm for the company was evident during an investor presentation, where we invited Mr. Priore for a discussion, highlighting Priority's undervaluation relative to its growth compared to other publicly traded companies and recent merger activity.
Throughout our association with Priority, we have regarded Mr. Priore as a trustee for all shareholders, which brings us to our concern over his preliminary offer to purchase remaining shares at a proposed price of $6.00 to $6.15. While we comprehend Mr. Priore's frustration regarding the market’s undervaluation of the company, we firmly believe this offer represents a severe undervaluation of Priority's true worth and its projected growth.
Firstly, the offer seems opportunistic, surfacing right after a decrease in stock price, following an unfavorable third-quarter earnings report. While the offer claims to provide a premium relative to the previous day's close, it actually stands as a discount to prices from earlier days. This starkly contrasts with the higher average prices from the 90 days preceding the earnings report.
Secondly, this proposal is significantly below the price set during the company’s secondary offering early in the year. As Mr. Priore articulated privately, that pricing undervalued Priority, which leads us to question why the current offer aims to exploit similar circumstances, marginalizing minority shareholders.
Moreover, the proposed price fails to reflect fair market values identified in similar transactions within the payments technology sector. Noteworthy transactions, including the sales of WorldPay and AvidExchange, were made under potentially less favorable growth scenarios than what Priority currently enjoys. Comparing valuation multiples from these transactions illuminates how Mr. Priore's offer substantially undervalues the company’s prospects.
We also harbor concerns regarding Mr. Priore's substantial 57% ownership stake, which could inhibit fair acquisition opportunities for other investors. We respect Mr. Priore professionally and recognize the frustrations he shares concerning the market's undervaluation of Priority. Nonetheless, selling minority shareholders short is not the resolution to this issue. We urge for the establishment of a Special Committee comprising disinterested board members tasked with evaluating all strategic options, including soliciting bids from potential external acquirers. We firmly believe the company's worth significantly surpasses Mr. Priore's proposed price, and only an independent transaction can realize this value.
A deal could be structured to maintain Mr. Priore's operational and voting control, while ensuring minority shareholders receive just compensation for their shares. It is crucial that the Board, particularly the Special Committee, rejects this unjust proposal and actively seeks all strategic avenues to enhance shareholder value, with a focus on pursuing a sale at fair pricing.
We urge the Board to decline Mr. Priore's offer and to initiate explorations of strategic alternatives that fairly reflect the company's long-term potential while ensuring shareholder transparency. We are ready to stand with fellow shareholders in opposing any deal that fails to guarantee complete and fair compensation.
We anticipate a timely response from the company’s leadership and advisors. Should we determine that our concerns are not addressed, we may consider making this letter public.
Sincerely,
Parsa Kiai
Managing Partner
Steamboat Capital Partners LLC
CC: Thomas Priore
Frequently Asked Questions
What is the main concern expressed by Steamboat Capital?
The primary concern is that the proposed buyout price undervalues Priority Technology Holdings and does not reflect its growth potential.
What is the proposed share price for the take-private offer?
Mr. Priore's offer ranges from $6.00 to $6.15 per share.
Why does Steamboat Capital believe the offer is opportunistic?
They see it as taking advantage of a temporary drop in share price following a disappointing earnings report.
What does Steamboat Capital request from the Board?
They urge the Board to form a Special Committee to explore all strategic options, including the possibility of a sale to external investors.
What is Steamboat Capital's stance on Mr. Priore's leadership?
While they respect Mr. Priore, they believe his offer is inadequate and does not serve the interests of minority shareholders.
