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What caused the recent flurry of deals in the fast consolidating payment processing sector?
Thursday 03 Aug 2017 Author: David Stevenson

Payment processing companies are in demand. FTSE 250 Paysafe (PAYS) receiving a £3bn bid (21 Jul) weeks after US credit card company Vantiv struck a £9bn deal to buy Worldpay (WPG) (4 Jul).

News of the Worldpay transaction came just 24 hours after Danish payments processor Nets confirmed that it had been in talks with US private equity firms including Hellman & Friedman over a potential buy-out. The Copenhagen-based firm had previously been purchased by private equity giants Advent International and Bain Capital in 2014.

And in the same week, French payment specialist Ingenico acquired Bambora for €1.5bn while another French company Worldline announced it was to buy Sweden’s Digital River World Payments.

The pattern is clear, payment processing companies are attractive to investment heavyweights and they don’t just want a stake but the whole thing.

PREMIUM BID FOR PAYSAFE

Paysafe, having previously rebuked an offer from a consortium including CVC Capital Partners and Blackstone in May, seems to be more receptive to the current all cash offer of £2.9bn.

According to the company this offer suggests a share price value of 590p. The UK-based company says this represents around a 34% premium over the average share price for the first six months to 30 June.

Someone from within the industry who preferred not to be named explains the draw of these type of firms. ‘Companies are realising the strategic importance of knowing what consumers are spending their money on and offering analytics insights to retailers to optimise business.’

Payment information is useful to retailers as it can allow them to tailor their advertising to certain customers based on spending history.

DRAMATIC BID FOR WORLDPAY

Worldpay’s journey into the hands of Vantiv is far more dramatic and includes one of the biggest moves in a FTSE 100 company’s share price for some time. When the company revealed it had been approached by two potential buyers, Vantiv and JP Morgan Chase, the share price shot up by 24% to 395p.

Once it became clear that Vantif was the preferred buyer the shares traded down and are currently at 375.10p. Our unnamed industry source says, ‘Event driven hedge funds thought the approach Vantiv made to Worldpay was the start of a process not the end of one’ hence the sharp price increase.

Jean Beaubois, analyst at investment bank Berenberg, says the attraction of a company like Worldpay is that it will give the likes of Vantiv international e-commerce capabilities that would allow the company to cross sell to their US client base.

Berenberg has been predicting that Worldpay ‘would be the perfect target for a US acquirer’ since 14 March this year.

Vantiv and Worldpay say it will now be able to serve a wider range of customers, with a strong position in the four core regions of the US, Europe, Asia-Pacific and South America.  These locations contain many of the world’s largest e-commerce merchants.

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