EML Payments has reached an in-principle agreement to settle a $37.36 million shareholder class action related to its 2020 acquisition, allowing the company to focus on its strategic growth plans.
- In-principle settlement of $37.36 million for shareholder class action
- Settlement relates to alleged misleading conduct over 2020 PCSIL acquisition
- No admission of liability by EML Payments
- Settlement funding from existing cash and debt facilities
- Approval by Supreme Court of Victoria still pending
Background to the Settlement
EML Payments Limited (ASX – EML) has announced an in-principle agreement to settle a shareholder class action initiated in 2022 in the Supreme Court of Victoria. The legal action was brought by shareholders who purchased EML shares during two specific periods between late 2020 and mid-2022. The plaintiffs alleged that EML engaged in misleading and deceptive conduct and breached continuous disclosure obligations related to its March 2020 acquisition of PFS Card Services (Ireland) Limited (PCSIL), particularly concerning concerns about PCSIL’s anti-money laundering and counter-terrorism financing frameworks.
Terms and Implications of the Settlement
The agreed settlement amount stands at $37,356,125, inclusive of interest and costs. This figure is subject to the execution of a formal deed of settlement and approval by the Supreme Court of Victoria. While EML expects these conditions to be met, there is no absolute certainty. Importantly, the company has made no admission of liability, framing the settlement as a commercial decision aimed at allowing the new board and management to concentrate fully on executing the recently announced EML2.0 strategic plan.
Funding for the settlement will come from EML’s existing cash reserves and debt facilities, indicating that the company does not anticipate needing to raise additional capital to meet this obligation. This approach may reassure investors about EML’s liquidity position despite the significant payout.
Strategic Focus Moving Forward
EML’s management has emphasized that resolving this legal dispute is a critical step in clearing the path for the company’s future growth initiatives. The EML2.0 strategy, unveiled in November 2024, aims to drive innovation and expansion across its global payments operations spanning Australia, the UK, Europe, the USA, and Canada. By settling the class action, the company hopes to avoid prolonged legal distractions and potential reputational damage.
However, the settlement’s conditional nature means that investors will be watching closely for court approval and the formal execution of the settlement deed. The outcome will likely influence market sentiment and could impact EML’s share price and credit profile in the near term.
Bottom Line?
EML’s settlement marks a pivotal moment, but the court’s approval will be the true test of its path forward.
Questions in the middle?
- Will the Supreme Court of Victoria approve the settlement without modifications?
- How will this settlement impact EML’s financial results and credit metrics in upcoming reports?
- What specific elements of the EML2.0 strategy will management prioritize post-settlement?