Payments giant Worldline to buy rival Ingenico in $8.6 billion deal as fintech competition heats up

• The transaction gives Ingenico an implied equity value of 7.8 billion euros ($8.6 billion), Worldline said in a statement Monday.
• Worldline CEO Gilles Grapinet will lead the combined company as CEO while Ingenico Chairman Bernard Bourigeaud is appointed non-executive chairman.
• Older payments players have been under pressure to consolidate as they face competition from a wave of new fintech rivals.

Two European giants in the payments space are set to combine to create the industry’s fourth-largest player.

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

The combined company would create the fourth biggest payments firm in the world, Worldline said, with projected 2019 net revenues of 5.3 billion euros and operating margins of 1.2 billion euros. Worldline expects the deal to create cost savings of 250 million euros over the next four years.

Under a primary tender offer, Ingenico shareholders are to receive 11 shares of Worldline and 160.5 euros 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 per Ingenico share based on Friday’s market close.

Worldline CEO Gilles Grapinet will lead the combined company as CEO while Ingenico Chairman Bernard Bourigeaud is expected to be appointed non-executive chairman.

Grapinet said the deal, which is expected to close in the third quarter of 2020, 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.”

Shares of Worldline sank 3% Monday, while Ingenico rose over 11%.

Wave of consolidation

The deal comes as legacy payment processors face increased competition from a multitude of new financial technology rivals which are snatching merchants with their digital payment platforms.

Companies like America’s Stripe, India’s Paytm and Britain’s Checkout.com have managed to hit eyewatering multi-billion dollar valuations thanks to the flood of venture capital gravitating toward the space. That’s thanks in no small part to the rise of e-commerce and the smartphone as a means of payment.

Amid that threat of fintech rivalry heating up, older payments players have been under pressure to consolidate to cut back on costs and bolster their digital offerings.

Last year saw U.S. fintech group Fidelity National Information Services (FIS) snap up payment processor Worldpay for about $35 billion, while Fiserv bought First Data in a $22 billion deal and Global Payments merged with Total Systems Services to create a $40 billion payments powerhouse.

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