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Worldline's Equens Acquisition Set to Change the Face of European Payments Market

Payments processor Worldline has agreed to acquire Equens for cash and stock in a multi-part transaction expected to close in Q2 2016, with both parties claiming this to be a transformational deal. Here we take a look at the details of the deal and assess the impact it will have on the European payments market.

Criteria for success in payments processing

The payment processing industry is a mature industry characterized by very high transaction volumes, strict processing deadlines, and high levels of regulatory oversight. Hence, success in the payments processing industry requires vendors to have:

  • The ability to process high volumes of transactions with short turnaround times
  • Leading market share in individual markets, not global (multi-market) size
  • Market-leading features/functionality.

In short, maintaining scale while driving additional functionality into its offering is what drives vendor success.   

Key features of the transaction

The Equens financial processing business will be merged into a new entity owned 63.6% by Worldline and 36.4% by current Equens shareholders (and ultimately Worldline will acquire 100% of the shares). The new company, Equens Worldline Company (EWC), is expected to have 100m payment cards serviced and ~€700m in revenues. Key markets serviced include France, Belgium, Germany, Italy, and the Netherlands. EWC will have the largest payment processing market share in each of those countries post-merger.  

Worldline will acquire 100% of PaySquare (Equens’ commercial acquiring business) for a cash payment of €72m (~$79m). PaySquare provides payment services to 50 financial institutions and acquiring services (in-country and cross border) to 120k merchants primarily in four countries: Netherlands, Belgium, Germany, and Poland. PaySquare is expected to increase Worldline revenues by ~25%.

Other features of the acquisition include:

  • The bank/shareholders of Equens (ABN Amro, DZ Bank, ICBPI, ING bank, and Rabobank) will renew contracts for 5 years, creating ~€1 Bn committed pipeline of processing business
  • The deal includes an option, starting in 2017, for Worldline to acquire any selling shares from Equens shareholders, and eventually acquire 100% ownership
  • The number of staff with electronic payment expertise will rise from 1.7k to 3k employees
  • There are targeted cost savings of €40m in infrastructure rationalization by 2018, and €15m per year in client-specific increased efficiencies by 2021. In addition, there will be one-time savings of €40m in synergy implementation costs between 2016 and 2018
  • The deal creates an omni-channel business, combining card capabilities (Worldline) with non-card capabilities (Equens)
  • An enhanced roadmap will result from consolidating and standardizing processing platforms, and reinvesting savings into enhancing features/functionalities of offerings (including client customization, country customization, cross border transactions, mobile, security, and analytics).

Outlook for the transaction

This transaction will be very important for the central European payments market. The impacts will include:

  • Lower cost for EWC by ~4% to ~5% of revenues
  • Creation of an unassailable leading payments vendor in five key markets: France, Belgium, Germany, Italy, and the Netherlands
  • Creation of a springboard for Worldline to challenge incumbent payments vendors in key adjacent geographies, including Scandinavia, Eastern Europe, and Southern Europe. Success in those markets would create a dominant Pan-European payments vendor
  • Greater resources available to develop  payment functionalities relevant to the central European marketplace.

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