- 16th April 2018
- Posted by: Manolis
LONDON — Worldpay Group, the British payments processing company, said on Tuesday that it had received preliminary approaches about a potential takeover from two separate suitors — Vantiv, an American rival, and JPMorgan Chase.
Payment processing has become an increasingly important business to many of the world’s biggest financial institutions as more people choose to make purchases online or with their cellphones and other devices. This transformation in consumer behavior is fueling growth in a new field of financial technology, or fintech, companies, and motivating acquisitions by traditional banking firms that don’t want to be left out.
Worldpay, based in London, provides payment processing for mobile, online and in-store transactions in 146 countries and is the largest payment processor in Britain, where it accounts for about 42 percent of all transactions.
The company says it processes 35.8 million transactions daily, including sales at hairdressers, restaurants and pubs. In 2015, the company said it processed 13.1 billion transactions.
The announcement on Tuesday sent shares of Worldpay almost 30 percent higher in trading in London. The company was valued at more than 8 billion pounds, or about $10.5 billion, based on its market capitalization Tuesday.
Any prospective deal could well rank among the most significant in the field in recent years. Still, talks between Worldpay and the potential suitors appear to be at an early stage, and it is possible no deal will materialize.
Banks have been hesitant to consider big acquisitions since the financial crisis of 2008 because of regulatory discomfort with the size of the biggest banks. Under the Trump administration, though, regulators have appeared to be taking a more hands-off approach, which could allow deals to move forward.
Worldpay is primarily a merchant acquirer, which means it works with stores and businesses to process their payments. This is an area where start-ups like Stripe, Square and Adyen have been making inroads.
Worldpay has long been part of the banking community’s effort to take on popular services like PayPal. But right now that competition is intensifying as Square and Stripe make bigger gains with companies wanting to accept smartphone and online payments.
Smartphones are where much of the potential is, capitalizing on consumers’ increasing comfort with using phones or an app to settle a restaurant bill, book a car or quickly send money to a friend.
PayPal has had a lot of success in this direction with Braintree, which PayPal owns, and which companies like Uber use to accept payments. Worldpay recently announced an effort to begin taking payments in virtual-reality games and stores.
JPMorgan, more than many other banks, has been particularly keen to build up its payment business. Its goal has been to have a hand in the payments infrastructure from start to finish, giving it greater power in the marketplace while potentially streamlining the experience for banks, sellers and shoppers.
While the biggest fight in the business is over smartphone payments and online purchases, JPMorgan has also been among the big banks trying to make inroads against peer-to-peer services like Venmo — an important market serving people who want to send one another money. JPMorgan has partnered with more than a dozen companies to set up Zelle to compete with Venmo.
Some of what is driving the interest is the threat presented by newer payment services like Apple Pay, or services like PayPal or Europe’s Klarna. Services like these can develop into a main point of contact with individual customers, potentially usurping traditional banks.
A Worldpay deal with Vantiv would expand the geographic footprint of Cincinnati-based Vantiv, which provides payment and technology services to merchants and financial institutions in the United States. A deal with JPMorgan Chase would bolster the processing power of the bank’s credit and debit cards business.
The potential offers follow an increase in deals in the sector in recent years.
In 2015, Visa paid 21.2 billion euros, or about $24 billion at current exchange rates, to acquire its former unit Visa Europe from an association of European banks and other payment service providers. The transaction was intended to expand Visa’s international reach and allow the payment network to better compete with Mastercard, which had integrated its European operations.
Vantiv has made several acquisitions in the payments space.
It agreed in November 2016 to acquire the United States arm of Moneris Solutions Corporation, a Canadian provider of payment services to merchants, for $406.8 million, and it agreed in April to buy Paymetric, a provider of electronic payment technology, for an undisclosed amount.
Worldpay said that a “further announcement would be made if appropriate” and that it had made the disclosure without the consent of Vantiv or JPMorgan. The statement came after media speculation that a takeover might be in the works.
Worldpay did not disclose a potential value for either deal.
Under British takeover rules, Vantiv and JPMorgan have until Aug. 1 to make a formal offer. JPMorgan declined to comment, and Vantiv did not immediately respond to requests for comment.
Worldpay has about 4,500 employees in 11 countries. It reported a pretax profit of £264.1 million in 2016.
Vantiv was spun out of Fifth Third Bancorp in 2009 and listed on the New York Stock Exchange in 2012. It processed about 25 billion transactions for merchants and financial institutions in 2016 and reported profit of $280.9 million in 2016. Vantiv employs about 3,500 people.