Worldpay and JD Sports

“It’s a big week for the markets with policy decisions from both the US Federal Reserve and the Bank of England. We’re also likely to get some update on Brexit, meaning there are various significant factors hanging over the heads of investors.

“Markets remain calm despite this backdrop with both the FTSE 100 and FTSE 250 indices rising on Monday and stocks also doing well across Asia. In the UK, miners and tobacco stocks lead the charge among blue-chip shares,” says Russ Mould, Investment Director at AJ Bell.

Worldpay

“Large corporate transactions continue to happen despite fears over a global economic slowdown. The latest behemoth to ink a deal is US payments giant FIS which has struck a $43 billion deal to acquire Worldpay.

“You need scale to win at payments processing and this deal certainly gives the two companies incredible breadth of coverage.

“And for Worldpay it means yet another owner after years of constantly moving house. Originally owned by NatWest, it then became part of Royal Bank of Scotland when the former bank was acquired.

“A private equity consortium subsequently bought the business before floating it on the London Stock Exchange in 2015. Two years later, Vantiv bought the business and the enlarged group adopted the Worldpay name.

“Worldpay processes billions of payment transactions a year around the world and makes money by collecting fees on these transactions. It also generates an income by advising customers on how to lower costs to credit issuers, card networks and other intermediaries, by settling these transactions in a currency of their choice as well as offering subscription-based data insights and fraud solutions.

“FIS focuses on retail and institutional banking, payments, asset and wealth management, risk and compliance, and outsourcing solutions.

“Parking the two companies together gives the enlarged business a very strong position by which to play the structural growth in digital payments. They will be able to provide clients a wider portfolio of services, suggesting this is a highly complementary corporate tie-up.”

JD Sports

“Given it snapped up an 18.7% stake in the company in February, today’s £90.1 million bid for Footasylum from JD Sports is perhaps not that surprising. However, the company was categorical last month that it wouldn’t make a full takeover offer.

“Some observers felt the investment was an attempt to block Mike Ashley’s Sports Direct from swooping for a direct rival.

“Whether JD’s denials were true at the time, or a classic piece of misdirection, the rationale for the full takeover appears to be that Footasylum offers exposure to a slightly older demographic than the younger teenagers which typically shop in JD stores.

“On the face of it, the offer looks pretty generous, even if it is a long way short of Footasylum’s market value at IPO of £171 million.

“It has been vulnerable for some time and arguably this move could have happened earlier. Perhaps the involvement of JD’s founders David Makin and John Wardle in the company was a complicating factor.

“After years of strong growth, JD shareholders will be hoping the company isn’t tripped up by its recent acquisition moves.

“Early signs from its 2018 purchase of Finish Line in the US have been positive but both it and Footaslyum were troubled businesses before being taken over. As such there has to be some risk they could dilute what has been a highly effective strategy of tapping into the ‘athleisure’ trend.”

These articles are for information purposes only and are not a personal recommendation or advice.