ALSO READWorldpay says agreed to be taken over by Vantiv in $10 bln deal Worldpay shares soar on bid approaches from Vantiv, JPMorgan US payment firm Vantiv buys UK's Worldpay for 9.3bn pounds Top up with credit card: Paytm to levy 2% fee, MobiKwik free NPCI to launch RuPay Credit Card in a "month's time"
By Pamela Barbaglia
LONDON (Reuters) - U.S. credit card processing company Vantiv secured a deal to buy Worldpay for 8 billion pounds ($10.4 billion) on Wednesday in a bid to create a $29 billion global payments powerhouse.
Vantiv's move, one of the biggest takeovers of a British firm since last year's Brexit vote, is part of a wave of payments company mergers as consumers move away from cash transactions to digital payments.
Once a backwater of banking, the sector is now both lucrative and fast-growing, but also faces competition from newcomers trying to disrupt the way merchants are paid.
Shares in Worldpay, Britain's biggest payment provider, closed 1.28 percent higher at 388.5 pence after Wednesday's announcement of the deal, which marks the second biggest takeover of a British company this year after China Investment Corporation's $13.8 billion purchase in June of London-based warehouse firm Logicor.
Other recent deals in the payment sector include Britain's Paysafe Group backing a 3 billion pound takeover offer from a consortium of Blackstone and CVC Capital Partners and French payments specialist Ingenico making a 1.5 billion euro swoop on Swedish rival Bambora.
Although Vantiv's deal was first announced on July 5, it has taken several weeks to conclude, with the deadline for a formal offer extended twice as Vantiv and Worldpay haggled over governance and safeguarding British jobs.
The combined Worldpay 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 London.
Worldpay said that Vantiv has offered 55 pence in cash, 0.0672 of a new Vantiv share, an interim dividend of 0.8 pence per Worldpay share and a special 4.2 pence dividend, valuing the former RBS business at 397 pence per share.
"Our combined company will have unparalleled scale, a comprehensive suite of solutions, and the worldwide reach to make us the payments industry global partner of choice," Vantiv's president and CEO Charles Drucker said, adding that the deal will bring benefits in terms of size and technology.
Vantiv is paying a premium of 22.7 percent to the closing Worldpay 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 Worldpay shareholders to vary the proportion of shares and cash they receive.
The company's international operations will be run from London, but there will be no formal guarantees for jobs in Britain where Worldpay's UK division employs about 1,200 of its roughly 5,000 total.
The combined company will process some $1.5 trillion in payments and 40 billion transactions 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 Worldpay 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 Latin America and the Asia Pacific region.
Vantiv chief financial officer Stephanie Ferris will become the group's CFO and report to Drucker.
The combined group will see five Worldpay 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 Worldpay directors, is expected to close early next year at the latest with no major regulatory concerns, Worldpay and Vantiv executives told analysts.
Goldman Sachs and Barclays acted for Worldpay, while Morgan Stanley and Credit Suisse worked with Vantiv on the deal, which gives Worldpay 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 deal was a sensible transaction which allowed UK 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."
"The tweaks (to the initial bid) have been beneficial but the fundamental questions around valuation persist," he said.
($1 = 0.7699 pounds)
(Additional reporting by Arathy Nair, Simon Jessop and Ben Martin; Editing by Rachel Armstrong and Alexander Smith)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)