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 PLC. at $10 billon, warding off a potential rival bid from global banking giant J.P. Morgan Chase & Co.
Worldpay and Vantiv said in a joint statement Wednesday that they had agreed to a deal in principle. J.P. Morgan, which had been looking at Worldpay, said it was "at a very early stage in considering" a bid following an invitation from the U.K. firm but decided against the move without providing a reason.
The proposed Vantiv-Worldpay combination, if successful, would create a trans-Atlantic payments processing giant with a combined market value of more than $20 billion. Vantiv has until Aug. 1 to make a firm offer.
Payments businesses are under pressure to join forces in part to cut costs as greater regulatory scrutiny and rising competition from technology startups squeeze the fees of incumbents. Worldpay rival Nets AS said last week 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.
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. By acquiring Worldpay, Vantiv would bolster its U.S. position and gain access to the U.K., markets where Worldpay processes millions of payments daily in stores, online and on mobile phones.
Vantiv and Worldpay said they have identified "substantial" opportunities for cost reductions, without disclosing how much or where they are. They added that their talks remain ongoing, and cautioned that there was no certainty any deal will be reached.
Vantiv is offering a share and cash deal that would value Worldpay at about 19% above its closing share price before Worldpay said Tuesday that it had received preliminary approaches from Vantiv and J.P. Morgan. In London trading Wednesday, Worldpay was down 8.6% at GBP3.73 ($4.83) after the stock had previously shot above the ultimate offer price.
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 for each share held.
The combined group would be led by Vantiv's chief executive officer, Charles Drucker, as executive chairman and co-chief executive. Worldpay CEO Philip Jansen would be co-chief, the companies said. Vantiv Chief Financial Officer Stephanie Ferris would retain the same role.
Emily Glazer contributed to this article.
Write to Ben Dummett at [email protected] and Max Colchester at [email protected]