US firm Vantiv to buy British rival Worldpay for £9.3bn

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UK’s largest payment processing company agrees to a takeover deal and primary listing on the New York Stock Exchange

Worldpay, the UK’s largest payment processing company, has agreed to a £9.3bn takeover by US rival Vantiv after reassuring MPs that the deal did not amount to post-Brexit “cheap pickings” for a foreign buyer.

A spokesman for the UK company said it had contacted senior politicians to explain the strategic rationale behind the deal, amid concerns that the fall in sterling since 2016 was turning prime British assets into bargains.

Ron Kalifa, vice-chair of Worldpay, said the firm had sought to reassure UK politicians about the sale. “We have had several conversations with senior members of parliament to make sure they understand the strategic rationale,” he said.

“We were not ready [to do the deal] last year when the pound was in a different position. Letting this opportunity pass by [now] would have been the worst decision for shareholders, customers and staff.”

When the takeover talks were first announced last month, Sir Vince Cable, leader of the Liberal Democrats and former business secretary, said the transaction represented “cheap pickings”. 

Days later, Worldpay’s chairman, Sir Mike Rake, said the pound’s slump had “killed” the company’s hopes of leading consolidation in the sector.

Other examples of UK companies bought by foreign firms in the wake of the Brexit vote include Cambridge-based Arm Holdings, which was purchased by Japan’s SoftBank for £24bn in July last year, and the engineering group WS Atkins, which was bought by Canada’s SNC-Lavalin for £2.1bn in April. The pound has fallen 12% against the dollar since the EU referendum and is trading at around $1.30.

Worldpay said on Wednesday that it was recommending an offer by Vantiv of 397p a share – against a closing price of 388.65p – valuing the company at £8bn. Vantiv will also pay £1.3bn to cover debts.

The combined group will be renamed Worldpay and headquartered in Cincinnati, where Vantiv is based. It will have a primary listing on the New York stock exchange and a secondary listing in London. 

The deal was announced on 5 July but it has taken a number of weeks for the two management teams to reach agreement on the details, including the guarantee of a London listing. The capital will become the international headquarters of the new group. 

Kalifa said negotiations took time because of the scale and complexity of the deal. “It will have a £22bn enterprise value on a combined basis so there is a lot to work through.”

Worldpay said outside the US there was little overlap with Vantiv. It did not give formal guarantees that UK jobs would be protected, but Kalifa said the deal was about creating growth and not cutting costs. If job cuts did occur in Britain they would be “negligible”, he added. The company has about 5,000 staff in London, Manchester, Cambridge and Gateshead.
  ]Worldpay handles 40% of card payments at tills in Britain and operates in a rapidly growing industry, as more people pay in shops and online by card.

The rise of contactless cards has accelerated the trend, becoming a popular payment method for lower-value transactions that were traditionally dominated by cash.

Vantiv will dominate the board with eight members, compared with five from Worldpay. Photograph: Brendan McDermid/Reuters 0px 0px 1rem; padding: 0px;"> The deal is subject to regulatory and shareholder approval and, if it goes ahead, Worldpay shareholders will own 43% of the new business; Vantiv investors will own the remaining 57%.

The group expects to generate cost savings of about $200m (£154m) a year following completion of the deal, partly because of the overlap in the US.

Vantiv will dominate the board with eight members, compared with five from Worldpay. The combined group will be led by Vantiv’s Charles Drucker, who will take on the role of executive chair and co-chief executive. Worldpay’s current boss, Philip Jansen, will be co-chief executive, reporting to Drucker.

Sir Michael Rake, chairman of BT and former Barclays deputy chairman, will continue at the merged group in the role of lead director, the US equivalent of a senior independent director in the UK.

Launched in 1989, Worldpay was previously owned by Royal Bank of Scotland, which sold the business in 2010 to private equity firms Advent and Bain Capital as part of the terms of the bank’s 2008 taxpayer bailout. The company was floated on the London Stock Exchange in 2015.

Kalifa said Vantiv was a natural partner for Worldpay. “Vantiv was owned by a bank, sold to private equity and then floated. Ultimately we’ve come from the same kind of stable so this makes sense.”

https://www.theguardian.com/business/2017/aug/09/us-firm-vantiv-to-buy-british-rival-worldpay-for-93bn

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