Tuesday , August 11, 2020

A Year Into His Own Merger, Worldpay’s CEO Offers Advice to Fiserv And First Data

The global processor Worldpay Inc. is beating its own expectations in knitting together the assets combined in the huge merger of Vantiv Inc. and Worldpay plc and is looking to make more acquisitions this year, top executives said Tuesday.

Speaking to stock analysts to discuss Cincinnati-based Worldpay’s fourth-quarter and full-year 2018 results, chief executive Charles Drucker also had some words of advice for Fiserv Inc. as it looks to swallow First Data Corp. in what will be an even larger industry merger than the big Worldpay deal, which closed 13 months ago. “We do have a close eye on that,” Drucker said.

Despite the wave of merger-and-acquisition activity that has already unfolded among payments processors, Drucker predicted more is coming, and not necessarily on a small scale. “We’ve always believed scale is key. It does matter,” he said. “There’s a lot of consolidation that has to happen.”

Drucker: “We’ve always believed scale is key. It does matter.”

Drucker warned, however, that big mergers can bring big headaches if not managed carefully. The first matter Fiserv and First Data will have to pay close attention to will be personnel, he said. “It’s two powerful companies coming together,” he noted. “In the short term, they have to sort through the complexities of the companies.”

Clarity with managers and staff will be crucial, he added. In the Worldpay-Vantiv merger, “we were very clear about who’s running what, and we did that very quickly,” Drucker said. “It’s how you manage your people that will determine” how disruptive the deal will be early on, he predicted. “That’s the first stage we usually see.” The next stage, he warned, will test how well the combined entity can manage its clients. The $22 billion Fiserv-First Data merger is expected to close in the third quarter, pending shareholder and regulatory approvals.

Indeed, Worldpay is far enough along in its integration of the old U.S-based Vantiv and the United Kingdom’s Worldpay operations that the company is eyeing more deals. “We’re only one year into this, and we feel real good about where we’re going,” Drucker told the analysts. “We’re back in the M&A market in 2019. If we think there are properties that can help us, we will deploy capital.”

He gave no hints about what properties Worldpay may be targeting, other than to say they will likely add to the company’s heft in its fast-growing technology solutions division. This unit posted $443.7 million in revenue in the fourth quarter, up 21% year-over-year when accounting for the combination of the Vantiv and Worldpay results. This unit, which accounted for 41% of Worldpay’s revenue in 2018, is expected to bring in fully half of revenue this year.

Its biggest unit, merchant solutions, racked up $516.1 million in the quarter but at 3% is growing much more slowly than technology solutions, as is the third division, issuer solutions, which grew 4% to reach $90.2 billion for the quarter.

Stephanie Ferris, Worldpay’s chief financial officer, told the analysts the combined company earned $52 million in cost savings last year, well ahead of the planned $45 million. “Our integration is running ahead of schedule,” she said. “We still expect it to wrap it up by the end of the second quarter.”

For the quarter, revenue totaled $1.05 billion, a 10% pro forma increase year over year. For the full year, revenue came to $3.93 billion, up 9%. Drucker and Ferris forecast that 2019 revenue will reach $4.2 to $4.26 billion.

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