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Tuesday, September 1, 2015

Rumored Worldpay grab shakes payments industry

Payments industry stakeholders have noted Ingenico Group's bid to acquire Worldpay Ltd., reported by Reuters on Aug. 28, 2015. The POS vendor's offer would value Worldpay at $9.2 billion (or 6 billion British pounds).

The merger, if successful, would follow Ingenico's January 2015 acquisition of ROAM Data Inc. ROAM's mobile commerce platform, now part of Ingenico Mobile Solutions, helped Ingenico expand its North American footprint. In a similar fashion, analysts expect Worldpay, the dominant merchant acquirer in Europe and the United Kingdom with a strong presence in the United States, to enhance Ingenico's global holdings.

Ingenico, a payment technology company established in 1985 and based in Paris, deploys approximately 30 percent of global POS devices. The Nilson Report placed the company's valuation at $8.34 billion, with an 18 percent annual growth rate. Ingenico Chairman and Chief Executive Officer Phillipe Lazare said Ingenico aims to be "the trusted third party in the retailer-consumer relationship." Some analysts have said it is unclear how adding an acquiring processor to its portfolio of companies would help the manufacturer maintain trust within its global distribution channel.

Ingenico joins Wirecard, CVC, Blackstone and Hellman & Friedman in the crowded field of bidders for Worldpay. Reuters reported that Wirecard bid $9.4 billion for the privately held company. WorldPay was purchased in 2002 by Royal Bank of Scotland (RBS) during an acquisition phase that included Lynk, TrustMarque International, Bibit and Cardsave. RBS later sold Worldpay to private equity firms Advent and Bain in 2010.

Processor neutrality, a vaunted tradition

Payments industry consultant Todd Ablowitz, President of Double Diamond Group LLC, led a LinkedIn discussion on Ingenico's potential acquisition of Worldpay. He questioned what kind of impact the merger, if successful, would have on the payments ecosystem. "Changes are definitely afoot and worlds are colliding," he wrote. "Will other acquirers balk at buying [Ingenico's] devices?"

Ablowitz went on to question if Verifone Inc., the second-largest POS equipment manufacturer, would follow suit by adding a payment processor to its product mix or take the high road by maintaining a posture of processor neutrality.

Verifone, which owns an estimated 51.5 percent market share of POS terminals worldwide, has experimented with recurring payment models in the past. SAIL, a mobile payments processing platform was discontinued in 2012. V-Connect, a subscription-based wireless gateway launched in 2004, was abandoned several years later. Both projects met with ire from the ISO and acquirer community, many of whom believe transaction fees and subscription-based services are the exclusive province of merchant acquirers.

Respondents to Ablowitz's LinkedIn discussion predicted an Ingenico-Worldpay merger would have dire consequences for Ingenico and an upside for emerging OEM brands such as Dejavoo Systems and PAX. "Buy stock in Dejavoo and [PAX]," stated Joe Garza, co-founder of Illinois-based Blackline Partners. "The Ingenico line will be dropped by many."

Terrence Lim, Director of Business Development at Cynoware Electronics Inc. in Nanjing, China wrote, "I expect Ingenico will lose a lot of the channel partners as it is never wise to compete with your customers."

Mony Zenou, who is the founder, President and CEO of I-POS Systems (the parent company of Dejavoo Systems) sees potential opportunities for incumbent POS manufacturers Dejavoo and PAX if the as-yet-unsubstantiated merger goes forward. Zenou stated that he and his team have repeatedly warned ISOs about the potential hazards of working with POS providers that become competitors. He expects Verifone to align with a payment processor if Ingenico buys Worldpay, which in his view, would "only accelerate the adoption of reliable alternative OEMs."

Privately held versus publicly traded

While Worldpay has reportedly planned an initial public offering, a majority of bidders would like to see the processor remain a private entity. Sources say that remaining private could potentially help the company achieve a higher valuation and freedom from quarterly performance objectives commonly associated with building shareholder value.

If Worldpay were to be acquired by Ingenico, it would become a division of a public company that has been listed on the Paris stock exchange since 1985 and regularly outperforming the market index. The Ingenico product line of POS devices has played a prominent role in the deployment of Europay MasterCard and Visa (EMV)-enabled devices across the United States as merchants have prepared to meet the October 2015 EMV liability shift.

"Payment is the universal, definitive and decisive element in the purchase act," Lazare wrote, adding that Ingenico has made significant contributions to the payments industry over the past 30 years. "We provide smart, trusted and secure solutions to empower commerce across all channels: in-store, online and on mobile."

Soon it may be possible for merchants to "accept any means of payment, from credit cards to alternative payment methods, be it in store, on line or on mobile," without ever having to leave Ingenico's footprint, he added. end of article

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