StoneCo to divest Linx and SimplesVet units to Totvs.

StoneCo is divesting its Linx and SimplesVet units. Brazil's Totvs has agreed to buy StoneCo's Linx unit. StoneCo has dropped from several Russell indices. The company reported Q1 adjusted earnings and revenue increases, and announced a share buyback. StoneCo's equity buyback plan has expired with 26.3 million shares repurchased.

StoneCo Ltd. (NASDAQ: STNE), a leading provider of financial technology and software solutions, has announced significant divestments within its software segment. The company has entered into definitive agreements to sell Linx and SimplesVet to TOTVS and PetLove, respectively. These transactions aim to unlock shareholder value, streamline operations, and allow management to concentrate on StoneCo's core growth strategy [1].

The Linx unit, which includes software assets covering various verticals such as education, retail, gas stations, automotive, and healthcare, has been sold to TOTVS for an enterprise value of R$3.05 billion, plus an estimated net cash position of R$360 million, resulting in a total amount of R$3.41 billion. The transaction is subject to customary closing conditions and regulatory approvals, including clearance by CADE, the Brazilian antitrust authority. Importantly, the fiscal goodwill of approximately R$3.8 billion associated with StoneCo's original acquisition of Linx will remain within StoneCo and will be amortized over the next 8 years [1].

SimplesVet, a veterinary-focused software solution, has been sold to PetLove for an enterprise value of R$140 million, representing approximately 4x revenue. This transaction has already received CADE approval. The consideration will be paid in cash, with a portion upfront and the remainder in fixed installments over three years, adjusted by CDI, with no performance-based contingencies [1].

The remaining software businesses, generating R$326 million in revenues and R$32 million in Adjusted EBITDA, will either be integrated into StoneCo's core offerings or evaluated for strategic fit. StoneCo plans to return excess capital to shareholders when immediate value-accretive growth opportunities are not available [1].

StoneCo's divestments represent approximately 79% of the software segment's revenue and 71% of its profitability, amounting to 9% of StoneCo's total revenues and 6% of its profitability. The company has also reported Q1 adjusted earnings and revenue increases, and announced a share buyback plan, which has expired with 26.3 million shares repurchased. Additionally, StoneCo has dropped from several Russell indices [2].

These strategic moves indicate StoneCo's focus on optimizing its portfolio and refocusing on its core payment processing business. The staged payment structure for the SimplesVet transaction provides ongoing liquidity while the larger TOTVS transaction awaits regulatory approval.

References:
[1] https://finance.yahoo.com/news/stoneco-announces-divestment-software-assets-110000754.html
[2] https://www.stocktitan.net/news/STNE/stone-co-announces-divestment-of-software-7wkn826zqrpi.html