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Shift4 Payments (FOUR -18%) is shifting lower today following its Q4 report last night. Shares of this payments processor are lower despite strong EPS upside and in-line revs. The main issue is that the FY25 revenue guidance was a bit light. Also, the company announced a pretty substantial acquisition. Shift4 will acquire Global Blue (GB) for $7.50 per share in cash, a 15% premium to Tuesday's close. We think this deal is the main reason for today's pullback.

• Starting with the Q4 results, FOUR described them as reasonably strong. They represented records across all major KPIs (key performance indicators), including end-to-end volumes, gross revenue less network fees, adjusted EBITDA, and especially adjusted free cash flow. End-to-end payment volumes increased 49% yr/yr to $47.9 bln. We did not get a lot of color on the soft FY25 revenue guidance, but FOUR did say that Q1 is shaping up in-line with expectations for volume and revenue.
• The company also expanded into new geographies and secured significant wins in Q4, including the 18 Alterra Mountain Company resorts alongside ticketing for the iconic IKON Pass (multi-resort ski passes). FOUR also renewed its deal with the Great Wolf Lodge, and it signed ticketing deals with the NY Yankees and Dallas Mavericks. It also signed agreements with the Portland Trailblazers and Arizona Diamondbacks.
• Turning to the Global Blue deal, the company is a market-leading payment platform. It does payments, tax refunds, and dynamic currency conversion. GB operates a true two-sided network serving over 75,000 luxury retailers and over 15 mln affluent consumers through a proprietary app. Shift4 has a large presence in the US and an expanding international footprint, while Global Blue operates across 52 countries in Europe, APAC and Latin America. The deal is set to close in Q3.
• The merchants they serve include names like LVMH, Prada, Bottega Veneta, Fendi, and many others. FOUR says the deal represents a $500+ bln payment cross-sell opportunity and its geographic footprint will accelerate FOUR's efforts in bringing its restaurant, hotel, and sports & entertainment products to new markets. FOUR says its cross-sell funnel expansion is $800+ bln today, and with this transaction, its total cross-sell funnel increases to over $1.4 trillion.
• Global Blue is the largest acquisition in FOUR's history at $2.5 bln, all in cash. The deal will be financed with existing cash on hand and proceeds from a $1.8 bln short-term bridge financing that will be replaced with long-term debt and convertible financing.

While the FY25 guidance was a bit light, we think the main reason for the sell-off today are concerns about the Global Blue deal. Its shares have not performed well and it is FOUR's largest purchase ever, so there is risk here. FOUR counters that, like many of its past deals, Global Blue has been overlooked and undervalued. FOUR does not see it as a broken business. FOUR also noted that the deal will fuel its geographic expansion plans. However, for now, investors are skeptical that it's a good fit and that FOUR is paying too much and taking on too much debt to finance the deal.