LONDON (Reuters Breakingviews) - Worldpay has wrung ample concessions from Vantiv. The British payments group on Wednesday clinched a 7.9 billion pound ($10 billion) takeover by its U.S. rival after twice extending a bid deadline. It should be enough to appease unhappy UK investors.
There’s little doubt over the strategic logic of a tie-up, which creates a payments group with unrivalled scale to win multinational business customers in the e-commerce sector. Worldpay shareholders nonetheless had two gripes about the original terms announced in early July: the price, and the fact that most of the offer came in the form of U.S.-listed shares which UK-focused fund managers cannot own.
The first complaint was always dubious, given the premium on offer and Vantiv’s limited wiggle room to make it more generous. The U.S. group’s offer of 55 pence in cash, 0.0672 Vantiv shares and an additional 5 pence dividend for each Worldpay share is unchanged from July. But a rise in Vantiv’s share price since has boosted the value of the package by 12 pence, to 397 pence.
Valued at pre-announcement prices, and excluding the dividend, Vantiv is paying Worldpay shareholders a premium worth 1.2 billion pounds. Pre-tax cost savings of $200 million per year, taxed at the U.S. group’s forecast 24 percent rate and capitalised, are worth about the same, according to Breakingviews calculations. That means Vantiv would struggle to justify a more generous offer. Besides, the implied valuation of almost 19 times Worldpay’s EBITDA for the last 12 months is hardly stingy.
Some Worldpay investors were understandably peeved that more than four-fifths of the offer is in the form of U.S.-listed shares they cannot hold, removing the benefit of any upside from the combination. Throwing in a secondary UK listing and a “mix and match” option which lets some shareholders take a greater proportion of cash should solve that.
British investors who want to bet on a global boom in e-commerce payments can do so through the London-listed shares, while those who would rather take more cash can do so as long as others are willing to accept more equity. Unhappy investors represented about 15 percent of Worldpay’s shareholder base by value, according to a person familiar with the situation. The latest concessions should see the deal through.
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