Friday , May 14, 2021

Mastercard Aces Out Visa in Sudden Bidding War for B2B Processor Earthport

In a rare public bidding war pitting the two leading payment card networks against each other, British business-to-business payment processor Earthport Plc’s board of directors on Friday recommended that its shareholders accept Mastercard Inc.’s all-cash buyout offer, which is 10% higher than Visa Inc.’s offer the board endorsed less than a month ago.

Earthport shareholders had been scheduled to vote on Visa’s cash offer Feb. 21, but that meeting will be adjourned now that the board has withdrawn its approval recommendation. Earthport said it “received an approach from Mastercard regarding a possible higher cash offer” after the Visa offer was announced Dec. 27.

“Following careful consideration, the Earthport board concluded that the [Mastercard] offer represented a superior offer for Earthport shareholders as compared with the Visa offer,” says an Earthport filing with British regulatory authorities.

It’s not yet clear what Visa’s next move will be. Visa’s only comment so far has been a brief statement issued through the London Stock Exchange. “Visa is considering its options and a further announcement will be made in due course,” the statement says.

London-based Earthport provides cross-border payment services to such clients as PayPal Holding’s Inc.’s Xoom money-transfer service, Hyperwallet, Ripple, TransferWise, and Bank of America Merrill Lynch. The company has regional offices in New York, San Francisco, Miami, and Singapore.

“With Mastercard’s experience as a global network, its bank distribution, technology and reach, including Mastercard Send and [Mastercard subsidiary] Vocalink’s faster-payment capability, financial stability and brand, Mastercard [believes it] can complement and enhance Earthport’s existing capabilities and allow it to accelerate development of a more robust account-to-account cross-border network service,” Mastercard said in a statement.

Earthport generated about £30.3 million in revenues in 2017, up 33% from £22.8M in 2016, according to a research note from New York City-based investment firm Keefe, Bruyette & Woods.

“Clearly both Mastercard and Visa view the B2B space as an attractive growth opportunity, and Earthport appears to be a strong asset in that it could provide connection into local bank accounts globally that may not be accessible through Visa or Mastercard debit cards,” KBW analyst Sanjay Sakhrani said in the note.

Mastercard is offering 33 pence (1 pence is 1% of a British pound sterling) per Earthport share versus Visa’s offer of 30 pence. Mastercard’s offer values the company at approximately £233 million ($305 million).

“It remains to be seen if Visa will make a revised offer to outbid Mastercard, especially given that Earthport shares are currently trading at around 36 pence per share, which is higher than the offer made by Mastercard,” KBW’s note says.

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