Credem (EMBI.MI), opens new tab has picked France’s Worldline (WLN.PA), opens new tab as the preferred bidder to buy its business to handle payment services for shopowners, the Italian bank said on Tuesday, after running a tender that involved the sector’s main players.
This is the latest sale of a bank’s ‘merchant book’, meaning contracts with retailers to process electronic payments in shops. Banks have been offloading them as advances in technology required growing investments.
Like many other such deals in Europe, Credem’s tender pitted Paris-based Worldline against Nexi (NEXII.MI), opens new tab, Italy’s market leader and Europe’s biggest payments group by transaction volumes.
Nexi already partners with Credem, a mid-sized bank with 68 billion euros in assets.
Worldline outbid Nexi by valuing Credem’s business at up to around 120 million euros ($131 million), when including any deferred payments based on set conditions, giving a double-digit multiple to core profit, a person with knowledge of the matter said. Wordline declined to comment.
As Credem’s current provider, Nexi would pose no switchover risks, a fact which normally allows a bidder to offer less.
A newcomer also faces the danger of losing customers to their existing supplier, which would normally offer discounts to retain merchants, succeeding on average in keeping at least a quarter of them, based on Nexi’s track record.
Nexi, whose main shareholders are private equity funds as well as Italian state agency CDP, has bought the merchant books of several Italian banks since 2017, including a landmark 1 billion euro deal in 2019 with Intesa Sanpaolo (ISP.MI), opens new tab.
On average, these transactions have valued such businesses just below 11 times the core earnings they generated.
To challenge Nexi’s dominance, Worldline (WLN.PA), opens new tab has traditionally bid more aggressively, valuing at some 20 times their core profit the merchant books it acquired in Italy, from lenders such as Banco di Desio e della Brianza (DESI.MI), opens new tab and the Italian arm of BNP Paribas (BNPP.PA), opens new tab.
Shares in Worldline fell 5% by 0900 GMT, against a 0.8% dip in France’s CAC40 equity index (.FCHI), opens new tab.
While the entire payments sector has come under pressure after a post-pandemic boom ran out of steam and competition mounted, Worldline’s woes have been compounded by a decision to drop risky clients after a supervisory clampdown in Germany. ($1 = 0.9184 euros)
