J.P. Morgan, Vantiv Make European Fintech Move With Approach to Worldpay--3rd Update
July 04 2017 - 2:09PM
Dow Jones News
By Max Colchester and Emily Glazer
LONDON -- J.P. Morgan Chase & Co. on Tuesday made a
preliminary approach to acquire U.K. payments business Worldpay
Group Inc., potentially marking one of the biggest deals for a U.S.
bank since the financial crisis and reflecting banks' growing
confidence in a shifting regulatory environment.
The board of Worldpay said it had received preliminary
approaches from J.P. Morgan and Vantiv Inc., a U.S.-based
credit-card processor. The board said there is no certainty an
offer will be made; the two parties have until Aug. 1 to announce
whether they intend to make an offer. As of Monday evening --
before the approach was disclosed -- Worldpay had a market value of
$8.2 billion.
The expression of interest by the biggest U.S. bank by assets
comes just days after J.P. Morgan and peers were given a regulatory
green light to return billions of dollars of capital to
shareholders via increased dividends and share buybacks. That news
bolstered U.S. bank stocks, which had risen sharply in the wake of
Donald Trump's electoral victory last November.
Like other big banks, J.P. Morgan has foregone sizable deals
since the crisis when it bought Bear Stearns and Washington Mutual
in distressed sales. Bank executives and analysts said the
postcrisis political and regulatory climate, which was hostile to
banks believed to be "too big to fail," made deal-making by the
biggest firms virtually impossible.
But the Trump administration has vowed to loosen the shackles on
banks and is in the process of putting its nominees, some former
bankers, into key oversight posts at the Federal Reserve and other
regulatory agencies.
"We've seen with the recent stress test results that the
regulators have clearly indicated a more comfortable position with
banks' returning and using excess capital right now," said Douglas
Landy, a partner at law firm Milbank, Tweed, Hadley & McCloy
who focuses on financial services regulation. "And if you can just
return it to your shareholders then why can't you use it for
strategic acquisitions? In some ways that's a better way to use it:
shore up your business model in a traditional space."
J.P. Morgan's move also shows the growing interest among big
banks in harnessing technology -- whether by building it or buying
it -- before it disrupts their businesses. In this, J.P. Morgan has
been particularly active, creating a person-to-person payments
transfer system meant to rival that of PayPal Holdings Inc. and
launching a high-end rewards credit card that has challenged the
premier offering of American Express Co.
Worldpay processes millions of payments daily in stores, online
and on cellphones, predominantly across the U.K. and the U.S. Its
shares soared 22% in Tuesday morning trading following the news, to
338 pence.
Payments businesses have recently been popular acquisition
targets. Banks and payment companies are racing to retool their
offerings as customers increasingly turn to mobile devices to pay
for goods.
Meanwhile, with processing fees being squeezed by regulators and
the rising competition from technology startups, incumbents are
trying to gain heft to generate economies of scale, analysts have
said. Worldpay's European rival payment company Nets AS said last
weekend that it had been approached by suitors. In April,
Mastercard Inc. got regulatory approval to acquire payment
technology firm VocaLink Holdings Ltd. for about $920 million.
J.P. Morgan already runs a European payments business, which is
based in Ireland and processes some 40 million credit and debit
transactions a day.
Like other banks, J.P. Morgan has been reshaping its business,
predicting customers will move away from credit cards and simply
pay with their cellphones. In 2015 J.P. Morgan announced an
overhaul of its Chase Pay product to better compete with the likes
of PayPal Holdings Inc. The bank has joined with a number of U.S.
merchants to push its payment app. While the bank has made a series
of smaller financial technology acquisitions in recent years, it
has so far held off from big-ticket deals.
Worldpay was owned by Royal Bank of Scotland Group PLC until
2010, when the bank was forced to sell the business following its
taxpayer bailout. Worldpay was then bought by private-equity groups
Advent International and Bain Capital, who listed it in 2015.
The business has been growing strongly, posting a 15% increase
in revenue to GBP4.54 billion in 2016. A person familiar with the
company said that the approach from Vantiv and J.P. Morgan was
unsolicited.
Write to Max Colchester at max.colchester@wsj.com and Emily
Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
July 04, 2017 13:54 ET (17:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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