MILAN (Reuters) - Intesa SanPaolo (ISP.MI) is selling its retailers’ payment business to Nexi (NEXII.MI) in a 1 billion euro ($1.1 billion)deal that will give the Italian bank a 10% stake in the country’s biggest payments group.
Intesa said it expected to reap around a 900 million euro capital gain from the deal when it closes next year, “extracting proper value” from a business that requires scale and investment to face growing international competition.
The bank, which has been supporting generous dividend payments partly through one-off transactions such as this one, said it may reinvest part of the proceeds from the Nexi deal.
“This capital gain might not be reflected in the net income entirely if, over the course of next year, allocations are identified that are appropriate to strengthen sustainable profitability,” Italy’s top bank by number of branches said.
Analysts at Jefferies said the business being sold made a 48 million euro profit in 2018.
“It ... looks like an obvious deal ... that provides flexibility on future dividend (once more) but implies modest (around 1%) downgrade to earnings,” they said.
Nexi said the transaction would add around 95 million euros to its 2020 core profit and drive a ‘high teens’ increase in its cash earnings per share.
Shares in Nexi closed up 4.2%. Intesa shares rose 0.6%.
Under the deal, Intesa will transfer its so-called merchant acquiring business comprising 380,000 retail outlets to a Nexi subsidiary for a value of 1 billion euros, receiving in return shares in the unit.
It will then sell those shares to Nexi and use part of the cash received to buy a 9.9% stake in the group for 653 million euros from Nexi’s top investor Mercury UK HoldCo.
Mercury, a vehicle of private equity firms Bain Capital, Advent International and Clessidra, currently holds 60.1% of Nexi following a stock market listing in April that raised 2 billion euros.
Nexi said it had struck a long-term partnership with Intesa whereby the bank would distribute to its clients Nexi services for a period of more than 20 years. The two groups also extended a current partnership on ATM machines and the cards issuing business.
Citi analysts said Intesa’s presence among Nexi’s shareholders could ease a long-mooted tie-up with rival SIA to create a national champion in the fast-growing payments sector.
Mediobanca acted as Nexi’s lead financial adviser. ($1 = 0.8996 euros)
Reporting by Valentina Za; Editing by Alexandra Hudson and Kirsten Donovan