In a play for scale in a rapidly expanding e-commerce market, Vantiv Inc. on Wednesday agreed to buy the United Kingdom-based processor Worldpay Group plc for approximately $9.9 billion. JPMorgan Chase & Co., which had also expressed interest in Worldpay, has withdrawn from the bidding.
The boards of the two companies announced an “agreement in principle” calling for Vantiv to pay almost $5, at current exchange rates, for each Worldpay share. That figure includes a dividend payment of about 6 cents per share. The deal values Worldpay at a premium of about 20.7% to the company’s closing price on June 30, before takeover speculation lifted its shares.
As recently as Tuesday, Chase had been a contender to buy Worldpay, leading the parties to release a statement announcing that the London-based processor was being pursued by both Vantiv and Chase. But the megabank later told Bloomberg it had dropped its bid.
The deal will bring considerable processing heft to Vantiv, already one of the largest U.S. merchant acquirers and transaction processors. It will particularly add economies of scale for Vantiv in the rapidly expanding global market for e-commerce transactions. “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 U.K. and U.S. markets,” the two companies said in a joint statement.
Expanded e-commerce business, as well as international exposure, could be critical for Vantiv. “For Vantiv this is a big move,” Jared Drieling, director of business intelligence at The Strawhecker Group, Omaha, Neb., tells Digital Transactions News. “If you look at what Vantiv has today, they lack an international capability.”
While the company paid $361 million to acquire e-commerce processor Litle & Co. in October 2012, “e-commerce remains the highest growth channel in payments and Vantiv remains sub-scale in this important area,” notes Thomas McCrohan, a payments analyst at Chicago-based Mizuho Securities USA LLC, in a research note released Wednesday. Worldpay’s e-commerce revenue grew a robust 22% last year, McCrohan says, adding, “the addition of Worldpay would likely be accretive to revenue growth” for Vantiv.
Vantiv ranks second to Chase among merchant acquirers worldwide with $921 billion in volume last year, according to data compiled by Mizuho. The firm ranks Worldpay ninth, at $144.2 billion. Worldpay has for years operated a major U.S. unit, based in Atlanta, that according to the latest figures processes for 100,000 small and medium-size merchants and about 15,000 larger businesses.
Royal Bank of Scotland Group in 2010 sold a majority interest in Worldpay, which had been its internal processing unit, to Bain Capital and Advent International. In 2015, the two private-equity firms listed the company publicly. Vantiv had been part of Fifth Third Bank but went public in 2012.