Should I buy stocks in Worldpay?
Forget Wirecard - this payment share is going through the roof today!
The Wirecard share was able to gain more than two percent on Monday and thus offset part of its losses on Friday. The number 1 topic in the industry today is, for once, not the allegations against the German payment processor, but another mega-deal in the USA. This also inspires the imagination of investors across the pond.
The US financial services provider Fidelity National Information Services, or FIS for short, submitted a takeover bid for British-American rival Worldpay on Monday. FIS wants to offer 0.9287 own shares plus eleven dollars in cash per Worldpay share. This equates to a bid of $ 112.12 per share, which is roughly a 14 percent markup on Friday's closing price.
Overall, Worldpay including debts would be valued at around 43 billion dollars (around 38 billion euros). Without debt, it's around $ 35 billion. It would be the biggest deal to date in the booming payment sector.
The size is what matters
"Size makes the difference in our industry, which is changing rapidly," is how FIS boss Gary Norcross sums up the mega takeover in a company statement. He expects the merger to generate revenue synergies of $ 500 million and another $ 400 million in cost savings.
The reason: the two companies complement each other in several ways. FIS primarily supplies banks and asset management companies with its payment processing systems and software and offers solutions for the outsourcing of financial services. Worldpay, on the other hand, has a strong position in online payment systems (omni-channel) and acquiring and is active worldwide, but above all in Great Britain.
Together, the two companies would have (pro forma) brought annual sales of around $ 12.3 billion and an adjusted EBITDA of $ 4.9 billion in 2018. Through the cost and sales synergies, FIS hopes to generate a total of $ 700 million in EBITDA synergies and six to nine percent organic sales growth by 2021. A free cash flow of nearly $ 4.5 billion is targeted within three years.
Payment industry in takeover fever
Exciting: The current payment processor Worldpay itself only emerged from a takeover at the beginning of 2018. At that time, the US company Vantiv had swallowed the British rival for almost eleven billion dollars. The joint company then continued to operate under the name Worldpay.
It wasn't until January of this year that another billion-dollar deal caused a sensation in the sector. At that time, the US payment technology provider Fiserv announced the takeover of the payment processor First Data for 22 billion dollars (around 19.3 billion euros) in shares.
Worldpay rises by over ten percent - and spurs the sector
For the Worldpay share, on Monday after the takeover plans became known, the increase was temporarily in the double-digit percentage range. The takeover bonus is almost completely included in the course, which is why it makes little sense to jump on the bandwagon now.
However, the ongoing takeover fever in the payment industry also worried European payment specialists such as Adyen (market value: 19.8 billion euros), Ingenico (market value: 4.0 billion euros) or Wirecard (market value: 13.2 billion euros). for a certain imagination and rising prices. With the sums that are now being called, they too have long since fit into the prey scheme.
Book tip: The history of the speculative bubbles
Authors: Galbraith, John Kenneth
Number of pages: 128
Release date: 19.03.2020
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