An EU payments tie-up would build a more comprehensive M&A defense. Gilles Grapinet, the CEO of Worldline (WLN.PA), could discover that his adversary’s adversary is a friend. This year, the market value of the French payment firm has decreased by sixty percent, which has made it an appealing target for a takeover. Worldline may want to consider forming a partnership with Nexi (NEXII.MI), an Italian competitor worth $10 billion, to avoid being acquired by a payment behemoth based in the United States.
Grapinet’s issues became much more severe in October when he reduced Worldline’s income projection for 2023. As a result of increasing fraud risks and pressure from regulatory authorities in Germany, the firm has decided to drop some customers. Since that time, the market value of Worldline has decreased to 4.6 billion euros, equivalent to $4.8 billion. According to a report by Reuters on December 1st, Grapinet is now attempting to recover investors’ trust by attempting to sell some of its assets.
It is possible that this is not the best method. Compared to Nexi and other significant U.S. competitors like Global Payments (GPN) and Fiserv (FIN), who trade at an average of 13 times their profits in 2024, Worldline appears to bargain at 7.6 times its earnings. Nevertheless, according to the statistics provided by Jefferies, Worldline is still the second-largest player in Europe in terms of the value of card transactions it handles for retailers. This is a point that prospective bidders will not afford to overlook.
This puts Grapinet in a difficult position. The French executive might want to think about merging with Nexi rather than decreasing closer and closer to being irrelevant. Both in-store and online digital transactions would be processed by the two companies, which would make them a powerful competitor in the European payments processing market. According to data provided by Jefferies analysts, Nexi and Worldline collectively processed transactions for a total of one trillion dollars in 2022, which accounted for 19% of the whole European market.
In the event that Nexi were to provide a premium of thirty percent through an all-share transaction, the equity of Worldline would be valued at five and a half billion euros. As a result of overlaps across Europe, especially in Italy and Germany, the expanded payment player has the potential to create annual pre-tax cash savings of 500 million euros, according to an estimate provided by Breakingviews. This estimate is predicated on the conclusion of Nexi’s purchase of North American competitor Nets in the year 2020.
The process of figuring out governance would be difficult. Approximately 17% of Nexi is owned by Italian state-controlled institutions such as CDP. Rome views Nexi as a strategic investment that will encourage the widespread use of digital payment methods throughout the country. In the event that the merger were to be conducted entirely through shares, the Italian investors’ stakes would most likely decrease to less than 11% of the merged group’s stock.
In the meantime, the share held by the French government in Worldline, which now stands at 4.4% through the public sector investment bank Bpifrance, would significantly decrease to 1.6%. On the other hand, Paris would not be willing to take on a more subordinate role. The calculations of Breakingviews indicate that for the French to equal the Italian state’s investment in the merged business, they may be required to purchase shares with a value of around 1.5 billion euros. This is even though the final payment may be lower because Bpifrance’s present interest includes additional voting rights. Nexi might offer Worldline the opportunity to head a future joint group or agree to maintain a listing in Paris. This would be an arrangement comparable to the one put in place in the partnership that resulted in the creation of the French-Italian eyeglass giant EssilorLuxottica (ESLX.PA).
Conquering national rivalries is not going to be an easy task. With that being said, Paris and Rome ought to begin contemplating the establishment of a continental payment champion to preserve the region’s expertise in payments.
According to a story published by Reuters on December 1st, which cited three individuals who are aware of the situation, Worldline is evaluating several alternatives, including the sale of assets, as part of its attempts to reassure shareholders following a significant decline in the price of its shares.
Reuters stated, citing a source, that the company saw a loss of more than half of its market capitalization in late October as a result of the company’s decision to reduce its full-year financial projections.
This decision has rendered the company susceptible to a potential acquisition, piquing competitors’ interest in the United States and private equity groups. Someone familiar with the French government’s thinking informed Reuters that this has caused anxiety within the French government, which closely monitors the situation and would prefer a bid for Worldline that the French lead. According to a different source, the French financial institution Credit Agricole, which is already a partner of the payments company, is reportedly considering the possibility of purchasing shares in the business.
