(Bloomberg) -- Italy’s Nexi SpA agreed to buy SIA SpA to create one of Europe’s biggest payment providers, adding to the wave of consolidation sweeping the continent’s financial services industry.
The all-share deal values closely-held SIA at 4.56 billion euros ($5.3 billion) and gives Nexi a 70% stake in the combination. It catapults the joint company into the nation’s top 10 publicly traded businesses, with annual revenue of about 1.8 billion euros and a market value of more than 15 billion euros.
“The combination with SIA should create significant value for shareholders,” analysts at Kepler Cheuvreux wrote in a note to investors on Monday. The deal “looks fairly strategic and the deal should finally bring more synergies than initially expected.”
Payment providers are ramping up acquisitions to bulk up across Europe, with France’s Worldline SA agreeing in February to acquire Ingenico Group SA in a 7.8 billion-euro deal. The industry is one of the most active for M&A globally as firms seek become more competitive and keep pace with rapidly changing technology.
Nexi and SIA wrapped up more than a year of negotiations after disagreements over government and valuations brought the talks to the brink of collapse several times. The merger creates a company with about 2 million merchants and 120 million cards, potentially making it a stronger competitor to Worldline and Adyen NV of the Netherlands.
Nexi is seeking to expand even further to become the biggest European payments provider, people with knowledge of the matter said. The Italian company has made a non-binding offer for Denmark-based Nets A/S, they said.
Nexi CEO Paolo Bertoluzzo will lead the new Italian group and SIA chief Nicola Cordone will stay until the deal closes, according to the statement. Nexi expects about 150 million euros in recurring cash synergies from the deal, with completion expected in the summer of 2021. The company will exchange 1.5761 of its shares for each one of SIA.
Nexi rose the most in almost a month in Milan trading at the opening. The shares climbed as much as 7.7% and were up 3% at 17.38 euros as of 11:28 a.m.
“Terms appear reasonable with synergies running ahead of our expectations,” Jefferies analysts including Paul Kratz said in a note. “We view the SIA-Nexi merger as a strategically important deal for Nexi and may help accelerate consolidation of the Italian acquiring market.”
Consolidation is also heating up European banking as lenders seek to restore profitability hit by negative interest rates and slow economic growth. Spain’s CaixaBank SA agreed to take over Bankia SA weeks after Italy’s Intesa Sanpaolo SpA’s succeeded with its purchase of smaller rival UBI Banca. Unicaja Banco said on Monday it has restarted talks over a long-mooted takeover of Spanish rival Liberbank.
Talks between Nexi and SIA intensified over the last few weeks talks intensified after the latter reached an accord to keep Italian lender UniCredit SpA as its main client, a key sticking point in determining its valuation, people with knowledge of the matter have said.
SIA, which is mainly owned by the Italian government through its Cassa Depositi e Prestiti SpA arm, counts Nexi and UniCredit among its biggest customers. In February, SIA’s board approved a plan for its own listing, after Nexi raised $2.3 billion in Europe’s biggest IPO last year that left its main investors, Advent International, Bain Capital and Clessidra SGR, with a joint 33% stake.
CDP will be the biggest investor in the combined company, with a stake of about 25%.
Nexi is being advised by BofA Securities, HSBC Bank and Mediobanca, while SIA is being advised by JPMorgan.
(Updates with synergies, expected closing in fifth paragraph, analyst comment in sixth.)
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