French payment services business Worldline has agreed a deal to buy local rival Ingenico for €7.8bn in cash and shares in a deal that aims to create a European champion in a rapidly consolidating industry.
The companies said on Monday the deal would create the world’s fourth-largest payment services provider, with combined revenues of €5.3bn last year servicing almost 1m merchants.
It brings together Worldline’s strength among merchants in its European stronghold, and Ingenico’s leadership in payments hardware, as well as its growing online commerce business.
The payments sector has been a hotbed of dealmaking activity in recent years, as companies seek scale to better exploit rapid changes in consumer behaviour sparked by the rise of online shopping and the ubiquity of smartphones.
Given that Worldline is only spending €2bn in cash on the deal, the combined group will soon be able to embark on further acquisitions to keep up with larger US players such as Fiserv and Global Payments, according to Worldline’s chairman and chief executive Gilles Grapinet.
“Once the integration is well under way, we will be able to take part in the inevitable future consolidation of the industry since our balance sheet will be strong,” he said on a call with reporters.
“It’s important for Europe to have a payments champion able to compete with the global leaders in a high-technology industry.”
Ingenico shareholders can expect to receive €123.10 per share, a 17 per cent premium on Friday’s closing price, or a mix of cash and shares. Worldline shareholders will end up owning 65 per cent of the combined group.
The companies predicted that earnings per share would rise by double digits and promised cost savings worth €250m annually by 2024 that will come from rationalising back-office functions, procurement, and other activities. There would be an unspecified number of job cuts from the 20,000 combined staff, but many workers would probably be able to be reassigned internally given the strong growth prospects of the business, said Mr Grapinet.
Ingenico has long been seen as a takeover target as it struggled through a series of restructuring plans because of declining sales in its hardware business. French bank Natixis explored a possible combination at the end of 2018 and companies such as Germany’s Wirecard and France’s Atos had also been mooted as potential bidders.
The companies spoke of their good cultural fit given that both are French, and said that Ingenico’s biggest shareholder, state-backed investment fund Bpifrance, supported the combination. Analysts at Olivetree Financial said it would not be “straightforward for non-French counter bidders to compete”, given that the deal would create “a French national champion”.
Cédric O, France’s digital economy minister, told the Anglo-American Press Association on Monday that he welcomed the deal. “There is global competition in payments systems, and size is really important in this business,” he said. “You have to invest in innovation.”
The companies said they expected the deal to close in June or July this year, subject to regulatory clearance.
Worldline shares fell 4 per cent in morning trading, while Ingenico’s were 11 per cent higher.
Morgan Stanley and Cardinal Partners advised Worldline, while Goldman Sachs and Rothschild & Co advised Ingenico.
Additional reporting by Victor Mallet in Paris
Get alerts on Financial services when a new story is published