dealmaking

JP Morgan Eyeing a UK Fintech Business

by

July 5, 2017

The US bank has been relatively quiet in the acquisition department ever since the financial crash. However, it has regained confidence and according to reports, is now approaching a UK fintech business. Worldpay Group could become the bank’s biggest acquisition.

 

Preliminary approaches

 

Fox Business reported the board of Worldpay admitting the US bank has made a preliminary approach to acquire the business. The board also received interest from Vantiv Inc. a US-based credit card processor. According to the news outlet, the board has given both parties until August 1st to announce their official offer intentions.

 

The news immediately sent the shares in the UK company to jump up. According to City A.M., the share price increased by 30% and started trading Wednesday morning at an all-time high. Worldpay told the share owners, “There can be no certainty either that an offer will be made nor as to the terms of any offer, if made. A further announcement will be made if appropriate.”

 

If the deal were to go through, a few notable shareholders would benefit. Blackrock, Aviva, Abu Dhabi Investments and Canada Pension plan all have significant shares in the fintech firms. For the FTSE 100 as a whole, analysts see it as a possible drawback. Chris Beauchamp, a market analyst at IG, told City A.M., “The firm was a welcome addition to an index that had become overpopulated by banks and miners” and that a possible acquisition and departure from the stock would be a “step backwards”.

 

The bank listed in 2015, after private equity firms Advent International and Bain Capital decided to push for an IPO.

 

Changing regulatory environment

 

JP Morgan is clearly reacting to the changing regulatory environment in the US. Since Donald Trump took over as the president, the banking sector has grown in confidence. Just days before the bank made the preliminary approach, the US banks had received news they can return billions of dollars of capital back to shareholders via dividend and share buybacks. This regulatory green light helped boost stock prices of banks and it might have helped them feel more confident in acquiring assets again.

 

The Trump Administration has promised to relax regulatory oversight of the banks even further. Douglas Landy, a partner at law firm Milbank, Tweed, Hadley & McCloy, commented on the latest news by saying, “If you can just return it to your shareholders then why can’t you use it for strategic acquisitions? In some ways that’s a better way to use it: shore up your business model in a traditional space.”

 

Banks’ focus is on technology

 

The move is also another indicator of banks trying to keep up with fintech innovation. Technology is a hot focus point for banks and fintech industry is witnessing many partnerships between upcoming startups and big banks.

 

Worldpay’s rival company, Net AS, recently announced how it has been approached by interested buyers and another firm. The sector is clearly targeted by interested firms looking to take a slice of the growing payments business sector.

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