Vantiv For Worldpay Shows Lure Of Size And Reach In Payments

As the saying goes — in sports, mob movies and for just about every other endeavor where competition and jockeying for top dog are part of a day’s work — Go big or go home.

So it is, was and seemingly will be with U.S. card processing giant Vantiv’s acquisition of Worldpay, which is based in the United Kingdom, in a deal that is worth about $10 billion.

The transaction gives Vantiv reach beyond the U.S. and brings Worldpay to the U.S. The trend may be an inexorable one toward digital payments, and it is a global trend, which means that global strategy makes sense for the biggest players in the field.

Yes, the stocks yo-yoed a bit on Wednesday, where Worldpay shares retreated about 9 percent on the day, and Vantiv itself was off 4 percent. Arbitrageurs on the Street may be a bit disappointed that no rival bidders emerged (it should be noted that Worldpay stock rocked up 28 percent earlier this week upon news of Vantiv and JPMorgan’s separate overtures to Vantiv). 

The all-stock deal is one that gives about a 19 percent premium to the Worldpay Monday closing price — and Vantiv is paying 55 pence a share in cash, a 0.0672 Vantiv share (new ones, signaling dilution, which may have been at least part and parcel of the stock decline).

For Worldpay, not a bad two years’ worth of work — actually, less — where Worldpay listed to the tune of 4.8 billion pounds, or about 260 pence, where Wednesday’s close was at 372 pence. The offer stands at 385 pence.

E-Commerce is the name of the game here, and with a daily transaction processing tally of more than 31 million mobile/bricks-and-mortar transactions, Worldpay is positioned to give Vantiv some torque right off the bat in Europe. And Europe, as you might guess, is an attractive market in which to have some torque when it comes to eCommerce.

The European eCommerce Report 2017 sees 14 percent growth this year in a market that already has been growing at roughly that rate, measured in value, at $602 billion in 2016. That $602 billion valuation is about 30 percent of global eCommerce value. For the record, Western Europe is among the hotter hotbeds of eCommerce, and within this region, the U.K. is among the livelier arenas, at a third of all transactions here. France and Germany and the U.K are 70 percent of transactions across Europe.

There’s gold in them thar clicks, and Vantiv makes its home across 146 countries and almost as many currencies, with a merchant roster spanning hundreds of thousands. Worldpay’s eCommerce sales have also been growing by about 21 percent, measured by 2016’s 387 million pounds.

Analysts seemed, at least at first blush, sanguine on the deal. As Reuters noted in a news report, eCommerce takes the strategic prominence here, with a Cowen research note claiming that “while Vantiv owns one of the most enviable U.S. acquiring businesses — over 30 percent of revenue from integrated channels — it has no exposure outside of North America.”

One aside: This is no one-off, the European lure. One rival, based in Denmark — that would be FinTech Nets A/S, and by rival we mean Worldpay’s rival — said last month that it has its own approaches via would-be acquirers. And Mastercard got its arms round VocaLink earlier this year.

In other words, in a wave that has yet to crest: Old Europe, meet new world (payments) partners.