SoFi to acquire payment software company Galileo for $ 1.2 billion
Anthony Noto, CEO of SoFi
Adam Jeffery | CNBC
Personal finance startup SoFi has agreed to buy payment software company Galileo for $ 1.2 billion.
The cash and equity deal will help companies launch new products, expand internationally and capitalize on consumers’ shift to digital finance, according to the CEOs of both companies.
SoFi CEO Anthony Noto said the digital switchover has been accelerated by the coronavirus shutdown as people lose access to physical bank branches.
“Now is the right time to do something like this – we are on the precipice of a digital transition from physical finance,” Noto told CNBC in a telephone interview. “It will serve people in this environment and the need for mobile financial services will only accelerate.”
Galileo has been around for a decade longer than its purchaser. The Salt Lake City, Utah-based software company connects banks to credit card processors through APIs or application programming interface software. The two companies started working together early last year when SoFi started using Galileo as the payment processor for SoFi Money.
Conversations about the deals began before “things got tough” due to the coronavirus, but they were able to continue despite the current economic downturn, according to Noto and Galileo CEO Clay Wilkes.
Galileo also works with many of SoFi’s competitors, including Robinhood, Chime, Monzo, Revolut, Varo, and TransferWise.
Wilkes, who will remain CEO of Galileo, and Noto said the companies will operate independently. But it is possible that some fintech colleagues will balk at a competitor who owns their software partner. Nonetheless, CEOs said the deal would likely benefit Galileo customers by helping them expand into new product lines, such as loans.
“We see product roadmaps that have big gaps that can easily be filled with the products developed by SoFi,” said Wilkes. “Now is the right time to do it. “
SoFi – last valued at $ 4.8 billion – has attracted investment from Softbank, Qatar Investment Authority, venture capitalist Peter Thiel and Silver Lake, among others. It was launched in 2011 with the refinancing of student loans and has since spread to personal and mortgage loans, refinancing, wealth management as well as a credit card and treasury account, and trading of loans. ‘stocks and cryptocurrency.
The deal includes $ 75 million in cash, $ 250 million in vendor financing debt and $ 875 million in company stock, according to people familiar with the negotiations who asked not to be named because the details were not disclosed.
Elsewhere in Silicon Valley, the flow of transactions appears to be slowing. Many venture capitalists are asking portfolio companies to tighten their belts and “survive” the current economic downturn. More than 12,000 start-up employees have been made redundant since March 11, according to a live tracker.
Noto, former chief executive of Twitter and former chief executive of Goldman Sachs, said the two fintechs were “stable and performing” during an unprecedented period for the United States.
“Every industry is affected and it hurts every person in the United States right now – they need access to money and financial services more than ever,” Noto said. “Both companies are doing very well despite the difficult environment.”