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DT, September 2017

With Worldpay, Vantiv Will Get More Heft And International Breadth
September 1, 2017

The concentrated U.S. merchant-acquiring industry will become even more concentrated once the pending merger of Vantiv Inc. and Worldpay Group plc is sealed as expected early next year.

Vantiv processed $550 billion in U.S. merchant volume in 2016 on 21 billion transactions, according to figures from Omaha, Neb.-based consulting firm The Strawhecker Group. Vantiv was the third-largest domestic acquirer after First Data Corp., at $1.9 trillion when all volume from its various bank partnerships and other channels is included, and JPMorgan Chase & Co.’s Chase Commerce Solutions, at $1 trillion.

London-based Worldpay’s U.S. operation headquartered in Atlanta posted volume of $120 billion in 2016 on 3 billion transactions, Strawhecker reported. Worldpay thus tied with Total System Services Inc. (TSYS) for sixth place by dollar volume.

“For Vantiv, the merger brings diversification from a geography and merchant-concentration perspective,” Jared Drieling, director of business intelligence at TSG, tells Digital Transactions in an email message. “Clearly, the deal provides Vantiv with international capabilities, and the top acquiring position in the United Kingdom. The merger also provides Vantiv some diversification within its existing merchant portfolio.”

Drieling also cites “e-commerce assets and technology synergies among both platforms” as key benefits of the deal.

“Worldpay is a heavyweight in international e-commerce, and Vantiv is a leader in U.S. e-commerce,” he says. “This will be a powerful combination.”

The combo will indeed create a behemoth in merchant acquiring and other processing services. The new Worldpay will process $1.5 trillion in global merchant-acquiring volume and 40 billion transactions annually, and serve “hundreds of thousands of merchants,” Worldpay chief executive Philip Jansen said on a conference call to review the deal.

Vantiv and Worldpay finally announced a formal deal Aug. 9. Vantiv will acquire Worldpay in a cash and stock deal that values Worldpay at $12 billion, a 34% premium to Worldpay’s six-month volume-weighted average share price and $2.1 billion more than Vantiv’s original bid announced in early July. Worldpay had requested two delays from United Kingdom competition regulators to announce a formal bid as it haggled with Vantiv, which is based in the Cincinnati suburb of Symmes Township, Ohio, over better terms for its shareholders, according to reports in the British financial press.

Under the revised agreement, the combined company will be known as Worldpay. Vantiv shareholders will own 57% of the merged firm and Worldpay shareholders will own 43%. The company will have its global headquarters in Cincinnati, with international headquarters in London. It will be headed by current Vantiv president and chief executive Charles Drucker, whose new title will be executive chairman and co-CEO. Jansen will become co-CEO, reporting to Drucker.

Drucker during the conference call specifically pointed to the growth opportunities in e-commerce and integrated payments, two areas where Vantiv is a leader. He referenced projections from McKinsey & Co. that say worldwide e-commerce sales will hit $4 trillion to $4.5 trillion by 2020 versus $2 trillion in 2015.

“The rapid growth of e-commerce creates an exciting opportunity for our combined company,” he said.

Drucker and Jansen said no decisions have been made yet about technology platforms and other operational issues, although they said the new Worldpay plans to make things as easy as possible for merchants.

“Obviously we’re in the early stages,” Drucker said. Jansen added that “there will never be one platform across the whole world.”

The deal is expected to close in 2018’s first quarter after getting shareholder and regulatory approvals.

—Jim Daly

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