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What's going on?
Shares of Worldpay, the UKs largest payments processor, soared by almost 30% on Tuesday after the company announced that it had been approached by two firms that may offer to buy it…
What does this mean?
Worldpay sells technology to businesses so that they can process card payments both online and in-store. Payments processors like Worldpay have seen business boom this decade as consumers increasingly turn to card payments and digital platforms (like Apple Pay) instead of cash to carry out purchases.
While theres no certainty that either deal will go through, Worldpay announced on Tuesday that both JPMorgan Chase and Vantiv, an American tech firm thats on a buying spree of digital payments firms, had stepped forward to try to buy the company and shares in Worldpay leaped to a record high on the news.
Why should I care?
For markets: Worldpay shareholders are holding their breath for a payout.
Companies typically get bought at a significant premium to their current share price, which helps explain the big move in Worldpays stock price. Also, the two suitors may even try to outbid each other, or another buyer could emerge which would likely boost the price that needs to be paid to Worldpays shareholders.
The bigger picture: The digital payments industry is currently crowded but is likely to have fewer, larger players in the future.
Payments companies need scale to be profitable: each transaction nets the payments processor only a small fee, so there need to be many transactions to cover all of the companys costs. The possible acquisition of Worldpay fits into a wider trend of merging or acquiring payments companies: Ant Financial is buying MoneyGram and Scandinavias largest payments firm, Nets, just received a set of takeover offers over the weekend.
Originally posted as part of the Finimize daily email.
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