Vantiv, Worldpay Announce Recommended Merger

The boards of directors of Vantiv, Inc. and Worldpay Group plc announced that they have reached agreement on the terms of a recommended merger of Worldpay with Vantiv and Vantiv UK Limited (a subsidiary of Vantiv).

Under the terms of the merger, which have been further detailed today in an announcement issued under Rule 2.7 of the UK Takeover Code, Worldpay shareholders will be entitled to receive £0.55 cash for each Worldpay share held and 0.0672 of a New Vantiv share. Worldpay shareholders will also be entitled to elect to vary these proportions under a mix and match facility (subject to offsetting elections being made by other Worldpay shareholders). Vantiv and Worldpay shareholders are expected to own approximately 57% and 43%, respectively, of the combined company's shares upon closing.

In addition, Worldpay shareholders will be entitled to receive an interim dividend of 0.8 pence per Worldpay share, and a special dividend of 4.2 pence per Worldpay share, which is conditional on completion of the merger.

The transaction will create a company with an enterprise value of £22.2 billion or US$28.8 billion. It contemplates a premium of approximately 34% to Worldpay's six-month volume weighted average price, and ascribes Worldpay an enterprise value of approximately £9.3 billion or US$12.0 billion.

The combination will result in the creation of a global payment provider to power omni-commerce, with comprehensive products and capabilities spanning traditional merchants, integrated payments, and global eCommerce. The merger will combine two of the most capable payments businesses in the world, with strong pro-forma growth and profitability, creating a business model with recurring revenue, diversified customer base, significant global reach, and robust financial performance.

Strategic Rationale

Unique combination of scale and global presence

• US$1.5 trillion in payment volume and 40 billion transactions processed through more than 300 payment methods in 146 countries and 126 currencies
• Based on the financial statements of Vantiv and Worldpay for the year ended 31 December 2016, the combined company would have pro forma net revenue of over US$3.2 billion and free cash flow generation of over US$1 billion
• Enhanced scale, leveraging its combined operations, technology infrastructure, and data analytics capabilities to deliver services that are cost effective and provide enhanced value to customers

 

Ability to capitalize on strategic and high-growth verticals

• Combination of a leading US payment provider and a leading UK payment provider to create a leading global eCommerce payment provider
• Creates a market leader in payment technology, who will be positioned to capitalize on strategic and high-growth verticals in the most attractive global markets
• Enhances ability of the combined company to strengthen and extend capabilities into attractive and high-growth vertical markets, taking advantage of the secular growth driven by increasing card adoption
• Creates ability for the combined company to extend capabilities into new and high-growth emerging markets

 

Integrated technology platform built for innovation and to manage complexity

• Complementary technology assets will provide a strong, integrated foundation for innovation and growth, enabled by Vantiv's agile and scalable US platform and Worldpay's flexible, highly advanced global platform
• Enhances the ability of the combined company to serve domestic and global markets
• Reduction in capital expenditure by harmonizing Vantiv and Worldpay's US technology platforms
• US and global technology platform will be developed, secured, and optimized by one of the industry's largest pools of engineering and technology talent

 

Powerful business model and financial profile

• Attractive business model and financial profile with recurring revenue, scalability and significant operating margins
• On a pro forma basis, assuming the merger had completed on 31 December 2016, the combined company would have US$1.5 billion of adjusted EBITDA, an EBITDA margin of 48%. and free cash flow generation of over US$1.0 billion
• Accretive to pro forma adjusted net income per share in 2019 and thereafter

 

Cost synergies will deliver significant value creation

• Substantial value creation for all shareholders through synergies that could not have been achieved independently of the merger
• Anticipated annual recurring pre-tax cost synergies of approximately $200 million to be fully realized by the end of the third year following completion of the merger

 

Capitalize on respective strengths to drive revenue opportunities

• Potential revenue opportunities to capitalize on high-growth and attractive market segments for the combined company including:
• Adding Worldpay's leading global eCommerce capabilities to Vantiv's existing US eCommerce capabilities, establishing a leading global eCommerce platform will cross-sell opportunities
• Transferring Vantiv's integrated payments technological know-how and capabilities to Worldpay's global merchant base
• Strengthening and extending capabilities into new and attractive vertical markets, for example, through faster deployment of Vantiv's B2B enterprise payment capabilities

 

The Combined Company

Following completion of the merger, Cincinnati, Ohio, will become the combined company's global and corporate headquarters and London, UK, will become its international headquarters. The combined company will be named "Worldpay".

To ensure a successful and smooth integration, the combined company will be led by Charles Drucker as Executive Chairman and Co-CEO. Reporting to Mr. Drucker will be Philip Jansen as Co-CEO, and Stephanie Ferris as CFO. Additional members of the combined company's executive team reporting to Mr. Drucker and Mr. Jansen will be announced at a later date.

The board of the combined company will consist of five Worldpay directors and eight Vantiv directors. Sir Michael Rakewill serve as lead director and Jeffrey Stiefler will continue to serve on the board of the combined company in a non-executive capacity.

The merger is expected to close in early 2018, subject to customary closing conditions as well as regulatory approval and approval by shareholders of both Vantiv and Worldpay.

New Vantiv shares will be authorized for primary listing on the New York Stock Exchange subject to official notice of issuance. In addition, Vantiv will seek a secondary standard listing on the Main Market of the London Stock Exchange in relation to the New Vantiv shares following completion of the merger.

Morgan Stanley & Co. International plc and Credit Suisse are acting as financial advisors and Skadden, Arps, Slate, Meagher & Flom is acting as legal advisor to Vantiv. Goldman Sachs International and Barclays Bank plc (acting through its investment bank) are acting as financial advisors and Allen & Overy is acting as legal advisor to Worldpay.