Worldpay, the UK’s largest payment processing company, has agreed to a £9.3bn takeover by US rival Vantiv after reassuring senior members of parliament the deal did not amount to a cheap sell-off of a British company after the Brexit vote.
In the latest case of a foreign takeover of a UK firm, Worldpay said it was recommending an offer by Vantiv of 397p a share, valuing the company at £8bn. Vantiv will also pay £1.3bn to cover debts.
The combined group will be renamed Worldpay and headquartered in Cincinnati, where Vantiv is based. It will have a primary listing on the New York stock exchange and a secondary listing in London. Worldpay shares were trading at 384p in early afternoon trade on Wednesday.
The deal was announced on 5 July but it has taken a number of weeks for the two management teams to reach agreement on some of the details, including the guarantee of a London listing. The capital will become the international headquarters of the new group.
Ron Kalifa, vice-chair, said negotiations took time because of the scale and complexity of the deal. “It will have a £22bn enterprise value on a combined basis so there is a lot to work through.”
Kalifa played down concerns that the tie-up amounted to a foreign company snapping up its smaller British rival, following the sharp fall in the value of the pound since the Brexit vote.
When the talks were revealed Sir Vince Cable, leader of the Liberal Democrats and former business secretary, said it represented “cheap pickings” after the devaluation of the pound.
Vince Cable
(@vincecable)Another top British company #Worldpay at risk following #Arm. Cheap pickings after #Brexit vote devaluation. Need reform #TAKEOVER rules.
Kalifa said Worldpay was proactive and had sought to reassure leading UK politicians this was not the case. “We have had several conversations with senior members of parliament to make sure they understand the strategic rationale,” he said.
“We were not ready [to do the deal] last year when the pound was in a different position. Letting this opportunity pass by [now] would have been the worst decision for shareholders, customers and staff.”
Other examples of UK companies bought by foreign firms include Cambridge-based Arm Holdings, which was purchased by Japan’s SoftBank for £24bn in July last year, and the engineering group WS Atkins, which was bought by Canada’s SNC-Lavalin for £2.1bn in April.
Worldpay said outside the US there was very little overlap with Vantiv. It did not give formal guarantees that UK jobs would be protected, but Kalifa said the deal was about creating growth and not cutting costs, and that if job cuts did occur in Britain they would be “negligible”. The company has about 5,000 staff in London, Manchester, Cambridge and Gateshead.
Worldpay handles 40% of card payments at tills in Britain and operates in a rapidly growing industry, as more people pay in shops and online by card.
The rise of contactless cards has accelerated the trend, becoming a popular payment method for lower-value transactions that were traditionally dominated by cash.
The deal is subject to regulatory and shareholder approval and, if it goes ahead, Worldpay shareholders will own 43% of the new business; Vantiv investors will own the remaining 57%.
The group expects to generate cost savings of about $200m (£154m) a year following completion of the deal, partly because of the overlap in the US.
Vantiv will dominate the board with eight members, compared with five from Worldpay. The combined group will be led by Vantiv’s Charles Drucker, who will take on the role of executive chair and co-chief executive. Worldpay’s current boss, Philip Jansen, will be co-chief executive, reporting to Drucker.
Sir Michael Rake, BT chair and former Barclays deputy chair, will continue at the merged group in the role of lead director, the US equivalent of a senior independent director in the UK.
Launched in 1989, Worldpay was previously owned by Royal Bank of Scotland, which sold the business in 2010 to private equity firms Advent and Bain Capital as part of the terms of the bank’s 2008 taxpayer bailout. The company was floated on the London Stock Exchange in 2015.
Kalifa said Vantiv was a natural partner for Worldpay. “Vantiv was owned by a bank, sold to private equity and then floated. Ultimately we’ve come from the same kind of stable so this makes sense.”