Deals and IPOs

Worldpay shares soar on bid approaches from Vantiv, JPMorgan

Key Points
  • Worldpay Group received rival bid approaches from Vantiv and JPMorgan Chase.
  • Shares of Britain's largest payment processor surged more than 25 percent.
  • The bids show how automated payments specialists have become attractive targets for credit card companies.
Credit technology firm Vantiv to merge with Worldpay in $9.94 billion deal
Credit technology firm Vantiv to merge with Worldpay in $9.94 billion deal

Worldpay Group, Britain's largest payment processor, on Tuesday received rival bid approaches from U.S. credit card technology firm Vantiv and JPMorgan Chase, sending its shares up by more than 25 percent.

The bid approaches show how automated payments specialists have become attractive targets for credit card companies, banks and technology firms seeking to capitalize on the growth in popularity of paying by smartphone or other mobile devices.

Danish payment services company Nets A/S, said over the weekend that it had also been approached by potential buyers.

Worldpay, which sells technology to businesses so they can take payments via cards, online or on mobile devices, said the approaches were preliminary and there was no certainty of any deal. Sources close to the company said the offers were unsolicited.

Worldpay's shares hit record high, up 25.4 percent. The company has a market capitalization of about 6.43 billion pounds ($8.3 billion), according to Thomson Reuters data.

Analysts suggested other companies might now be interested in making a bid.

"We believe Worldpay is a unique asset and the current interest from two U.S. peers could also trigger the intention of parties like Google, Amazon, Apple," a note from Mediobanca Securities said.

Vantiv and JP Morgan now have until August 1 to announce firm intentions to buy or else walk away. Vantiv could not immediately be reached for comment. JP Morgan declined to comment.

Emphasis on scale

The payment processing industry has grown rapidly as consumers shun cash. The number of non-cash transactions rose 8.9 percent in 2014 to reach 387.2 billion, according to Capgemini's World Payments Report.

While banks have been trying to develop and buy more sophisticated technology, payment service companies like PayPal and Worldpay gained a large part of the market share during the e-commerce boom.

Set up in 1989, Worldpay was spun out of British bank Royal Bank of Scotland to private-equity firms Bain Capital and Advent International in 2010.

The buyout firms listed the company on the London Stock Exchange in late 2015, when it was valued at 4.8 billion pounds.

Deal activity in the payments industry has so far been dominated by smaller companies being merged into divisions of bigger groups. Earlier this year, an analyst at Pacific Crest Securities said the emphasis may instead shift toward scale, noting Worldpay and Vantiv as a compelling deal.

Vantiv, which has a market capitalization of $12.32 billion has recently gone on a buying spree of smaller players. It bought Moneris Solutions USA for $425 million and Paymetric, which automates business payments processing.

While Vantiv is U.S.-focused, Worldpay supports 400,000 merchants in 126 currencies across 146 countries. It also has a highly-developed e-commerce platform which serves large and fast growing internet-led multinationals.

Worldpay's enterprise value to earnings on a next twelve-month basis is at 13.88 times, according to Thomson Reuters data, above a ratio of 9.89 times for its rivals.