By Ben Dummett and Max Colchester
Vantiv Inc., a major U.S. credit-card processor, has made an offer valuing U.K. payments group Worldpay Group Inc. at $10 billon, potentially beating out rival bidder J.P. Morgan Chase & Co.
Worldpay said in a statement Wednesday that it had agreed a deal in principle with Vantiv.
The deal, if successful, would create a trans-Atlantic payments processing giant with a combined market value of more than $20 billion. The preliminary agreement still leaves space for J.P. Morgan to make a counterbid. Both parties have until Aug. 1 to make a firm offer.
Vantiv is offering a share and cash deal that would value Worldpay at about 19% above its closing share price before speculation of a deal began. Under the current merger on offer, Worldpay shareholders would own approximately 41% of the share capital of the two groups.
Under the terms of the possible deal, accepting Worldpay shareholders would get 55 pence in cash and 0.0672 of a Vantiv share for each share held--giving them 41% of the combined group. Shareholders would also receive a cash dividend of 5 pence a share giving an overall value of GBP3.85 ($4.98) for each share held.
J.P. Morgan confirmed Wednesday it was considering an offer for Worldpay following an invitation from the U.K. firm, but decided not to go ahead with an offer.
Vantiv and Worldpay said they have identified "substantial" opportunities for cost synergies, without disclosing how much or where they are. They added that talks between them remain ongoing, and cautioned that there was no certainty any deal will be reached.
The combined group would be led by Vantiv's chief operating officer, Charles Drucker, as executive chairman and co-chief executive. Worldpay CEO Philip Jansen would also be co-chief, the companies said in a joint statement. Vantiv chief financial officer Stephanie Ferris would retain the same role.
Worldpay is particularly strong in the U.K. and the U.S., processing millions of payments daily in stores, online and on mobile phones.
Ohio-based Vantiv helps merchants, banks and credit unions accept credit- and debit-card payments, as well as gift cards and online payments mainly in the U.S.
Payments businesses are under pressure to consolidate as regulators and rising competition from technology startups, squeeze the fees of incumbents. Worldpay rival Nets AS said last week that it had been approached by suitors. In April, Mastercard Inc. received regulatory approval to acquire payment-technology firm VocaLink Holdings Ltd. for about $920 million.
Write to Ben Dummett at firstname.lastname@example.org and Max Colchester at email@example.com