WorldPay: Bidders line up for quality asset

Today, Royal Bank of Scotland (RBS) confirmed it has received six advanced bids for its Global Merchant Services division, which is better known by its main brand-name, WorldPay. The six bidding groups consist of no less than seven private equity investors, all battling to buy the company, which processes credit and debit card transactions. Bidders include: Clayton Dublier & Rice; American Express and Permira; Atos Origin, CVC Capital Partners and Welsh Carson Anderson & Stowe; TPG; Advent International and Bain Capital; and Moneris Solutions. Warburg Pincus was also linked to the deal, but has now dropped out of the bidding process.

Initial estimates suggest RBS WorldPay could fetch about £3.5bn for its parent company, which is heavily indebted and majority owned by the UK government. Clearly private equity firms are very interested, as are trade players American Express, Atos Origin and Moneris Solutions. But, with so few large deals being done in Europe, why has RBS WorldPay caught the eyes of so many major buyout houses?

Global Merchant Services handles around half of all face-to-face credit and debit card transactions in the UK, and also processes payments for mail order and internet retailers. It is a highly profitable business for RBS, but terms negotiated with the UK government over its bail-out package mean it must sell the unit. For this reason, over 40 buyers have been linked to the sale since it was announced in November last year, and it is an attractive investment opportunity for some of Europe's largest private equity players.

For many, the difficulties of gaining leverage for large transactions has been the main barrier to multi-billion pound buyouts. Speaking at a recent roundtable, David Whiteley, managing director of leveraged loan syndicate at Lloyds TSB Corporate Markets said, "Mid-market deals are the easiest to put together but it's the larger transactions, such as RBS WorldPay, that require, say, €1bn of senior debt, which are more challenging." Leveraging large-scale transactions is likely to continue to be problematic for some time, but the high level of interest in RBS WorldPay shows there is an appetite out there for high-quality acquisitions of profitable companies that can comfortably meet debt obligations.

Of course, the sale of WorldPay is ongoing, and RBS itself has been wary of some private equity advances, saying it is concerned they lack the expertise to run such a large and complex business. Some have teamed up with trade players as a response, with Permira and American Express making a joint bid, while CVC and Welsh Carson Anderson & Stowe have joined forces with IT firm Atos Origin. Moneris Solutions, a Canadian payments processing provider, could also be a strong bidder for the firm.

All eyes will be on the sale of WorldPay, which could be the biggest private equity backed buyout in Europe this year. While the mega-buyout market is unlikely to take off any time soon, it seems there is an appetite for profitable firms with reliable and growing revenues.

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• Topics
• UK / Ireland
• Nordics
• Benelux
• Southern Europe
• DACH
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• Financials
• Warburg Pincus
• TPG Capital
• Advent International
• CVC Capital Partners
• Permira