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Switzerland's SIX looks at potential $2 billion sale of payments unit: sources
September 20, 2017 / 6:26 PM / 3 months ago

Switzerland's SIX looks at potential $2 billion sale of payments unit: sources

FRANKFURT/LONDON (Reuters) - Swiss stock exchange operator SIX Group has hired JPMorgan (JPM.N) to look at options for its payments unit, including a sale worth up to 2 billion Swiss francs ($2.1 billion), sources familiar with the plans told Reuters.

A man walks past a logo of SIX Group pictured at the entrance of the Swiss stock exchange in Zurich, August 2, 2011. REUTERS/Christian Hartmann

The decision to kick off a strategic review comes amid a wave of mergers and acquisitions in the fragmented payments industry as consumers increasingly switch to card and mobile payments and as regulatory changes promise to open the market to more competition.

Several private equity groups have bought payments businesses to merge them with peers while some European companies are currently carrying out strategic reviews or have already hired banks to find new investors amid rising industry valuations.

Zurich-based SIX helps process payments and provides debit and credit card terminals to retailers, restaurants and hotels. The annual core earnings of its payments business are about 145 million Swiss francs, a person familiar with the matter said.

SIX may still opt for a stock market listing or could decide to sell a minority stake, the sources said.

Any sale could fetch a multiple of about 14 times its expected core earnings, people familiar with the industry said.

SIX and JPMorgan declined to comment.

For decades, payments firms have existed as a backwater in the banking landscape. Usually set up by banks, they enjoyed a cosy relationship with them as customers but had little funds at their disposal to invest in technology.

A new European Union directive is set to come into force next year which requires banks to open up their procurement of payments services to third parties.

Technology newcomers including Adyen, iZettle, Square and Stripe are among a wave of fintech players who are trying to disrupt the relationship between banks and payment processors to widen options for how merchants are paid.

DEAL FRENZY

Mastercard kicked off the consolidation in the sector last year with the purchase of UK’s Vocalink and the pace has picked up over the past few months, with a series of deals in recent weeks driving valuations higher.

This summer, Portuguese banks have hired Deutsche Bank to review options for their payments firm SIBS, while Germany’s savings banks are looking for a buyer of a minority stake in their BS Payone unit, sources familiar with the matter told Reuters.

Austrian banks have asked HSBC to kick off a sales process for their payments business Card Complete, the sources said.

Sources familiar with the negotiations expect SIBS to reach a valuation of 400-500 million euros in any potential deal, similar in value to BS Payone, which is being marketed by advisor EY Innovalue.

    Austria’s Card Complete is seen reaping less than half that, they said, but it could whet the appetite of some sector rivals including Germany’s Concardis.

    Advent and Bain, which bought Concardis earlier this year, have said they want to use the company as a platform for further consolidation.

    Private equity groups such as Advent, Bain, Warburg Pincus, Blackstone and CVC are expected to participate in the various auctions, the sources said.

    Concardis was valued at about 700 million euros, representing a multiple of 13 times its expected core earnings, while other deals valued payments firms at more than 18 times.

    The owners of SIBS, BS Payone, Card Complete and their advisers as well as the potential bidders declined to comment.

    Separately, buyout funds Hellman & Friedman, Permira and Nordic Capital are currently circling Danish payment services firm Nets (NETS.CO).

    Among the many other deals, U.S. credit card processor Vantiv (VNTV.N) is buying Britain’s Worldpay (WPG.L), French Ingenico (INGC.PA) is buying Stockholm-based Bambora and private equity funds Blackstone and CVC have teamed up to buy Britain’s Paysafe while rival Permira has bought a stake in Klarna.

    ($1 = 0.9614 Swiss francs)

    Additional reporting by Francois Murphy, Andrey Khalip, Ben Martin, Eric Auchard; Editing by Elaine Hardcastle

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