A day after payments company Worldpay confirmed that it had been approached by Vantiv and JPMorgan for a possible acquisition, today the company confirmed that it has agreed to the terms of an offer from one of them, Vantiv. The US payments company is offering £3.85 per share, working out to around £7.7 billion (or just under $ 10 billion) for the company, which competes with Verifone, PayPal, Stripe and a number of other companies in the area of online and point-of-sale payments.
(The announcement today detailed a share price of £3.85 per Worldpay share, but the final, exact pricing will depend on Vantiv’s share price when the deal closes, Worldpay has confirmed to me. The company is traded on the NYSE, and if the deal goes through Worldpay will be delisted from the London Stock Exchange, Worldpay said in a statement today. Worldpay shareholders would own approximately 41 percent of Vantiv at the close of a deal.)
The news has sent Worldpay’s stock falling after ratcheting up massively in speculative trading yesterday.
The companies are now embarking on a due diligence process that will complete by August 1, per UK regulatory rules, and in the meantime they are outlining the rationale for the deal.
“The Boards of Worldpay and Vantiv see compelling strategic, commercial and financial rationale for combining Worldpay and Vantiv’s complementary businesses,” Worldpay noted in a statement issued to the market. “The Potential Merger creates a scale world class payments group in a dynamic market, with deep payments capabilities, product and vertical expertise and strong distribution channels to serve merchants around the world in the global e-commerce market, and in-store and online in the UK and US markets.”
Indeed, the deal will tighten the screws on competitors: e-commerce is often a low-margin, high-scale business, and Vantiv is gaining scale in this deal. The company says that its business will cover the US, Europe, Asia-Pacific and South America, “including many of the world’s largest e-commerce merchants, and a substantial base of merchants of all sizes in Europe and the US.”
The deal will also see some consolidation, which is to be expected: “The Boards of Worldpay and Vantiv have identified substantial opportunities for cost synergies, which support significant potential shareholder value creation,” Worldpay notes.
The companies will effectively merge, with Charles Drucker taking on a role as executive chairman and Co-CEO and Philip Jansen as Co-CEO. Stephanie Ferris will be CFO.
As we mentioned yesterday, Worldpay today competes against a lot of the more established financial startups that provide payment services both online and to physical merchants, but the company itself did not come out of that massive wave of new tech companies; rather it was one of the services created by an incumbent bank to help stave off any disruption.
It has been around since 1989, before the first dot-com wave, started out of a subsidiary of NatWest Bank in the UK, and eventually it became a part of RBS (the Royal Bank of Scotland) when those two banks combined. It was then spun off in 2009 as part of a divestment agreement struck with the European Commission to help give RBS a bail-out package during the banking crisis.
It has been publicly listed since 2015.
Worldpay has had its share of headlines around malicious hacking of its services but it has also been making moves to position itself at what it believes could be some of the newer frontiers in payments, such as developing a prototype for VR payments, and a secure, smartphone-based payment service that works using the camera’s contactless chip reading functionality and an app — no extra hardware required.
Vantiv shares a common previous investor with Worldpay, Advent International, and is today the largest merchant acquirer in the U.S. (It’s also had a taste of controversy: last year, the company made the headlines when it pulled payment processing from FanDuel and DraftKings, citing ongoing legal cases against the two over whether or not they are gambling services.)
Worldpay would help Vantiv, which is biggest in the US, to expand its reach to more markets. Worldpay says that it serves some 400,000 customers and processes payments in 146 countries and 126 currencies. The U.K. is its largest country, where it has more than 40 percent market share of all businesses.