Nexi has turned itself from potential prey to predator in Europe’s rapidly consolidating payments industry. Sunday’s acquisition of Nordic rival Nets, following the previously announced purchase of local operator Sia, will propel the 9.4 billion euro Italian group to the top ranks of European companies processing financial transactions. It will now go head-to-head with French rival Worldline for the next round of deals.
The all-share deal will give Nets shareholders, including buyout firm Hellman & Friedman, around 31% of the enlarged company, once Sia is included. This values the Nordic group’s equity at 6 billion euros, based on Nexi’s closing share price on Friday. The 11% bump since the pair first confirmed the talks two weeks ago reflects a rally in Nexi’s shares.
The latest acquisition gives Nexi Chief Executive Paolo Bertoluzzo operations in some 25 European countries and grafts Nets’ expertise in processing e-commerce transactions onto the buyer’s strength in serving merchants. The addition of Sia at a cost of close to 5 billion euros will bring infrastructure for clearing and settling payments.
Based on current share prices, the three companies will have a combined market value of more than 20 billion euros. Projected cost savings from the two deals of 195 million euros a year, taxed at 25% and capitalised, add a further 1.5 billion euros of value. The enlarged Nexi will still be smaller in market value terms than Worldline, which is in the process of absorbing the 8 billion euro Ingenico. But Nexi’s pro-forma EBITDA of 1.5 billion euros for this year will surpass the estimated 1 billion euros produced by its expanded French rival.
Neither company is showing signs of slowing down. With the number of independent payments companies dwindling, the next wave of acquisitions is likely to focus on bank-owned payments operations. Lenders like France’s Société Générale, BBVA of Spain and Polish bank Pekao still tend to handle most of their own payments services. But Covid-19 is putting pressure on them to raise cash. Intesa Sanpaolo pocketed around 1 billion euros last year by selling its merchant acquiring businesses to Nexi.
Worldline and Nexi won’t have the European industry to themselves. U.S. giants like the $56 billion Global Payments already have a foothold on the continent. Indeed, to maintain their status, the predators of Europe’s payments business may eventually have to consider joining forces.