Worldline's sale of TSS to Apollo stalls over deal terms

The US buyout group is understood to have slowed down work on the unit in the last couple of weeks, but the deal has not yet been shelved, two of the sources said.

Apollo remains engaged with the sell-side and there is hope that the transaction goes ahead given the sponsor's keenness to own the asset and the amount of work conducted on the deal, one of the sources said. A deal failure would be a bad outcome for the vendors having run such a long process, another of the sources said, adding it is now a case of negotiations. There is still a risk that Apollo walks away, however, this source said.

Worldline has given Apollo a deadline of 16 November to submit a final offer, the first source said.

The value of Apollo's offer was estimated to be a little short of EUR 2.5bn when it entered exclusive negotiations over the summer, according to a previous report by Mergermarket.

Apollo wants a discount on TSS's valuation partly due to concerns over the unit's performance in the last year, two of the sources said. The underperformance comes as supply bottlenecks hurt demand for terminal sales globally, one of them said. The fact that TSS has not yet migrated from a hardware business to a platform-as-a-service business is another reason the sponsor is negotiating, as growth from hardware is valued less highly than software, this source added.

While the deal was previously expected to be done at around 8x EBITDA, the expectation now is that the valuation is closer to 6x-7x EBITDA, the other source said.

TSS is being sold based on adjusted EBITDA of EUR 340m for 2021, which is estimated to fall to EUR 300m in 2022, as the business model – which is currently based on leasing revenue – is expected to shift to a recurring subscription revenue model, as reported.

Two weeks ago, Worldline's board announced that TSS had been established as a standalone entity and that ongoing sale discussions were progressing according to plans.

Worldline declined to comment. Apollo was not immediately available for comment.

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• Apollo Management