Worldline’s $8.6 Billion Ingenico Deal May Trigger Global Fintech Consolidation

European fintech giant Worldline’s $8.6 billion bid to acquire rival Ingenico creating the world’s fourth-largest payments company may trigger further consolidation in this highly competitive segment. Although the new entity may not threaten bigger U.S. players like Twitter-founder Jack Dorsey’s Square, and Stripe, a host of smaller firms may struggle to survive the rising competition.

The deal comes at a time when legacy payment processors face increased competition from new financial technology rivals that are snatching merchants with innovative digital payment platforms.

Among the U.S. companies at the lower end of the spectrum are Betterment, Kabbage, Coinbase, Avant, Credit Karma, SoFI, GreenSky, Robinhood, and MarketAxess. However, the combine may not threaten the $60 billion giant Ant Financials of Alibaba founder Jack Maa that owns Alipay.

France’s Worldline said it would buy domestic rival Ingenico in a deal comprising 81% stock and 19% cash transaction. The transaction will give Ingenico an implied equity value of 7.8 billion euros (approximately $8.6 billion), Worldline said in a statement, marking a 17% premium on Ingenico’s closing price as of Friday.

Transaction details

The acquisition would create the fourth biggest payments firm in the world, Worldline said, with projected 2019 net revenues of 5.3 billion euros (approximately $5.8 billion) and operating margins of 1.2 billion euros (approximately $1.3 billion). Worldline said it expected the deal to create cost savings of 250 million euros (approximately $276 million) over the next four years.

Under the primary tender offer, Ingenico shareholders will receive 11 shares of Worldline and 160.5 euros (approximately $177.5) in cash in exchange for seven Ingenico shares. There would also be a secondary offer that gives Ingenico investors 56 Worldline shares for 29 Ingenico shares, translating into an offer price of 123.10 euros (approximately $136.1) per Ingenico share based on Friday’s market close, a report on the CNBC website said.

Worldline CEO Gilles Grapinet will head the new company as CEO while Ingenico Chairman Bernard Bourigeaud is likely to be the non-executive chairman, the report said.

Grapinet said the deal is expected to close in the third quarter of 2020 that would help create a “world-class leader” in Europe’s digital payments sector, calling it a “landmark transaction for the industrial consolidation of European payments.”

Ingenico’s Bourigeaud said the takeover “offers a unique opportunity to create the undisputed European champion in payments on par with the largest international players.”

Other consolidation attempts

Older payments players will come under pressure to consolidate to cut back on costs and bolster their digital offerings or innovate and diversify to survive.

Recent acquisitions of note were U.S. fintech group Fidelity National Information Services’ (FIS) acquisition of payment processor Worldpay for $35 billion, and Fiserv’s buying of First Data for $22 billion. Global Payments merged with Total Systems Services to create a $40 billion payments powerhouse.

“We do see a lot happening … from a competitive perspective,” Nick Tubb, head of commercial affairs for Ingenico’s e-commerce payments arm, told CNBC recently. “We see advanced consolidation in the market with lots of value being created.”