(Bloomberg) -- Italian payments processor Nexi SpA agreed to buy private equity-owned rival Nets A/S, creating the Europe’s biggest payments firm by volume in a quickly consolidating industry.
The all-share deal values Copenhagen-based Nets at 7.8 billion euros ($9.2 billion), including 1.8 billion euros of debt, the companies said in a joint statement Sunday. Nets shareholders will receive 406.6 million new Nexi shares, initially resulting in 39% of the combined entity.
The transaction, finalized just a month after Nexi purchased another competitor, adds to a wave of consolidation sweeping the continent’s financial services industry, and will extend the Italian company’s reach across Europe, where it has operations spanning Italy, German-speaking countries and the Nordics.
The two firms wrapped up weeks of talks with a deal that will generate about 170 million euros of synergies per year. U.S. buyout firm Hellman & Friedman -- Nets’ main owner -- as well as Advent International and Bain Capital will remain shareholders in the new entity, with Nets investors subject to a lock up period of six to 24 months.
“The strategic rationale of the deal is appealing, extending Nexi’s growth runway beyond Italy,” Jefferies analyst Paul Kratz said in a note. While the deal is appealing, the “short initial lock-up does shift the risk back to Nexi shareholders.”
Nexi Chief Executive Officer Paolo Bertoluzzo has rapidly expanded the company through acquisitions, announcing his pursuit of Nets just days after agreeing to the milestone acquisition of Italy’s SIA SpA for 4.6 billion euros. When the SIA purchase is complete, Nets’ stake in Nexi will decrease to 31%.
The combined firms will be “uniquely positioned to catch further M&A opportunities,” Nexi Chief Financial Officer Bernardo Mingrone told analysts during a conference call on Monday. Merchant banking, bank-owned payment assets and improving tech capabilities are three areas where Nexi may consider non-organic growth, he said.
The joint company will be Europe’s biggest payment business by volume, number of customers and earnings before interest, tax, depreciation and amortization. Netherlands based Adyen NA is the continent’s biggest payments company by market value.
Consolidation in the payments industry started last year in the U.S., when Fiserv Inc. agreed to take over First Data Corp. in a deal valued at the time at $22 billion. European rivals have since tried to bulk up to remain competitive, with France’s Worldline SA agreeing in February to buy Ingenico Group SA.
The deal will quadruple Nexi’s footprint in Europe, giving the company access to markets in 25 countries, many of which currently have low penetration for digital services, Bertoluzzo said in a statement on Sunday. The joint company will generate about 2.9 billion euros of revenue on a pro-forma basis in 2020, according to the statement.
Nexi rose as much as 3.6% in Milan trading and was up 1.9% to 15 euros as of 9:40 a.m., giving the firm a market value of 9.45 billion euros.
The integration of the three payments businesses will take place in phases. Nexi will initially focus on the combination with SIA in Italy while Nets management continues to run the company like a stand alone business until a wider integration takes place in 2022.
Nets’ private-equity owners invited a group of potential buyers to submit offers, Bloomberg reported in October. On Nov. 2, Nexi said it was entering a 10-day exclusive negotiating period, later extended to Nov. 16, to pursue a binding agreement to buy Nets, which is backed by buyout firm Hellman & Friedman.
Founded in 1984, Hellman & Friedman has a long track record in financial-services investments. The company owns a platform called AllFunds which is a consolidator of fund administration businesses and used to be an investor in stock exchange Nasdaq. Since its inception the fund raised over $50 billion of committed capital and is currently deploying its ninth fund with over $16.5 billion firepower in equity.
Centerview Partners, HSBC Holdings Plc BofA Securities and Goldman Sachs advised Nexi on the transaction, while Lazard advised Nexi’s related parties committee. JPMorgan Chase & Co and Credit Suisse advised Nets, the firms said in the statement.
In third quarter Nexi’s revenue increased 1% to 276 million euros. Volumes recovered in the period, with acquiring transactions on Italian cards back to pre Covid-19 growth levels, but the company said it has seen a new slowdown in volumes since October due to the second wave of the virus.
(Adds Nexi CFO comments in seventh paragraph)
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