The scramble to capitalise on the growing trend to shop online is continuing after the payments processor Paysafe received a near-£3bn bid from a private equity consortium eager to gain access to the fast-growing sector.
Shares in Paysafe shot to record highs after the announcement of the 590p-a-share offer from the private equity houses Blackstone and CVC, a consortium that has made four approaches for the company since May.
The offer for Paysafe, a constituent of the FTSE 250 index, comes just weeks after a £7.7bn offer for Worldpay helped to illustrate the consolidation taking place among companies that process online transactions.
The sector is growing rapidly as people shift from using cash to paying by card and shopping online, which requires card and digital methods of payment. Recent data from the British Retail Consortium found cash was used for fewer than half of all UK retail transactions for the first time in 2015.
Based in the Isle of Man, Paysafe generates around half its business from processing payments for online gambling sites and also operates pre-paid payment cards. It only became large enough to join the FTSE 250 last year, after changing its name from Optimal Payments in 2015.
The multibillion-pound all-cash bid was announced alongside its own takeover of a Texan processing company, Merchants’ Choice Payment Solutions, which will give Paysafe access to point-of-sale processing. Paysafe is paying $470m for the business.
As well as Worldpay, which has agreed terms about an offer from its US rival Vantiv, other companies have also been targeted. For instance, a Danish processing company, Nets, has received offers while the French company Worldline is taking over a Swedish rival. Private equity houses are also interested, not only Blackstone and CVC but also Permira, which is taking a stake in a the Swedish business Klarna.
Paysafe said there was no certainty that a formal offer would be made but its largest shareholder, Old Mutual, which owns 10% of its shares, was backing the offer.
CVC would be buying back into a business it had previously sold as it used to own the payments system Skrill, which is now part of Paysafe. Blackstone has less experience in the payments sector although the two investors have worked together in the past, including in Merlin Entertainments, owner of Legoland and the London Eye, which was floated in 2013.
“Private equity firms like Blackstone and CVC Partners recognise that businesses like Paysafe have a stronger value proposition than conventional payment cards. They give users a clear overview and control of spending with the convenience and security of a single pin or password. Once customers have been won, additional features and services can be integrated,” said Angus Grierson, head of corporate finance at the financial advisory business LGB.
The price is a 34% premium to the average price for the six months to 30 June, Paysafe said. Analysts at UBS said the the deal made sense but that in terms of multiples to earnings – around 14 times – it was “not a particularly high multiple in the context of payments”. Paysafe’s shares were trading at around 580p, just below the offer price.
