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US card firm Vantiv seals $10 bn merger deal to buy Worldpay

Worldpay shareholders will own around 43%, while Vantiv investors will have 57% of combined group

Reuters  |  London 

Vantiv, a credit card processor
Vantiv, a credit card processor

processing company moved closer to creating a $29 billion global payments powerhouse on Wednesday with a formal offer to buy Britain's for 8 billion pounds ($10 billion).

Vantiv's move is part of a wave of payments company mergers around the world as consumers are moving away from cash to a or mobile payments and the industry, once a backwater of banking, faces growing competition from newcomers trying to disrupt the way merchants are paid.

Recent deals have included payment firm Group backing a 3 billion pound takeover offer from a consortium of and CVC Capital Partners and French payments specialist Ingenico making a 1.5 billion swoop on Swedish rival Bambora.

Although Vantiv's was first announced on July 5, it has taken several weeks to conclude, with the deadline for a formal offer extended twice as and haggled over governance and safeguarding

The combined and Vantiv, which were both spun out of banks and have thrived in their home markets, will be called "Worldpay" and headquartered in Cincinnati, with a primary listing in New York and a secondary one in

said that has offered 55 pence in cash, 0.0672 of a new share, an interim dividend of 0.8 pence per share and a special 4.2 pence dividend, valuing the former RBS business at 397 pence per share.

"Our combined company will have an unparalleled scale, a comprehensive suite of solutions, and the worldwide reach to make the payments industry global partner of choice," Vantiv's president and CEO Charles Drucker said, adding that the will bring benefits in terms of size and technology.

shareholders will own around 43 percent, while investors will have 57 percent of the combined group whose pro forma enterprise value is more than 22 billion pounds.

is paying a premium of 22.7 percent to the closing share price of 320 pence on July 3, the last business day before the offer period started, and has proposed a "mix and match" facility which allows shareholders to vary the proportion of shares and cash they receive.

The company's operations will be run from London, but there will be no formal guarantees for in where Worldpay's division employs about 1,200 of its roughly 5,000 total. is Britain's biggest payment provider, processing about 31 million mobile, online and in-store each day.

Global Platform

The combined company will process some $1.5 trillion in payments and 40 billion through more than 300 payment methods in 146 countries and 126 currencies, with a combined net revenue of over $3.2 billion.

"We're creating a truly global platform for expansion," said CEO Philip Jansen, adding the business will rank as the top payment firm in the U.S. and in Europe and sees scope for additional growth in and the region.

The new will be led by boss Charles Drucker as executive chairman and co-CEO while Worldpay's Jansen will report to Drucker and act as co-CEO.

chief financial officer Stephanie Ferris will become the group's CFO and report to Drucker.

The combined group will see five directors sitting on the board with Sir Mike Rake, who is Worldpay's non-executive chairman, becoming lead director of the new board.

The deal, which has been unanimously recommended by directors, is expected to close early next year at the latest with no major regulatory concerns, and executives told analysts.

Fragmented Market

Goldman Sachs and Barclays acted for Worldpay, while Morgan Stanley and Credit Suisse worked with on the deal, which gives an enterprise value of about 9.3 billion pounds and will result in annual recurring pre-tax cost synergies of about $200 million.

These synergies are expected to be fully realised by the end of the third year following completion of the merger.

But the combined group is also expected to incur one-off restructuring and integration costs of around $330 million.

Craig Bonthron, a fund manager at Kames Capital, said that the was a sensible transaction which allowed investors to participate in the upside and would help consolidate "what is a fragmented market and diversify Vantiv's revenues away from struggling 'big box' retailers in the U.S."

But a top 20 investor told Reuters he wanted to speak to Worldpay's directors because he felt Vantiv's bid undervalued the business, although he welcomed a secondary listing in

"The tweaks (to the initial bid) have been beneficial but the fundamental questions around valuation persist," he said.

said on Wednesday its first-half underlying earnings rose 13.6 percent, driven by strong growth across all its businesses and tightened costs at its unit.

First Published: Wed, August 09 2017. 18:34 IST