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Should PE owners of Worldpay list or sell?

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June 8, 2015

The payment processing company, Worldpay, announced last week it is preparing for an IPO. But reports over the weekend suggest the PE-backed company might receive a bid from JP Morgan.

The British company, Worldpay, announced last week it is preparing for an initial public offering, but reports over the weekend suggest the company might yet to go down a different route. Whatever the route to exit, the private equity owners will most likely make a hefty profit from the payment processing company.

Plans for the IPO

The company told last week, it has hired banks to help with its listing. As the news broke out many analysts told the company’s IPO would put it straight into the top 100 list of the FTSE.

The private equity firms, Advent and Bain Capital, bought the company in 2010. The deal was worth £2 billion, but it is expected the IPO could raise at least double the amount of money. The Financial Times reported the flotation could be close to £1 to £1.5 billion and value the company at £6 billion.

Worldpay was one of the first companies to offer Internet payments, as it launched its Streamline service in 1994. According to This Is Money, the company made £374 million in profits last year.

Furthermore, the payment processing company has rapidly expanded its operations in recent year. If the IPO is to go ahead, the company could be one of the biggest London flotations of the year.

Worldpay has hired six advisers to help with the IPO – Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley, Barclays, UBS and Credit Suisse. Interestingly, one major bank was not included on the advisor list.

A Plot to Buy

But IPO might not take place after all, as reports over the weekend suggest JP Morgan might be planning a bid for Worldpay. The Sunday Times report says the Wall Street giant is considering to bid for $6 billion for the company.

An insider had suggested to the Sunday Times, the bank’s absence from the advisor list is all down to avoiding a possible conflict of interest.

JP Morgan has held preliminary talks with the company, but it has not received access to the intricate financial data.

Hefty Return

Whether the company decides to sell to JP Morgan or go down the listing route, it is guaranteed to provide a great return for the two private equity companies. Around 10% of the company is currently in the hands of its employees, as part of an employee benefit trust, and they could benefit as well.

The company was sold to the private equity firms in the aftermath of the financial crash. RBS bought the company in 2002, but was forced to sell it as part of the conditions laid by the British government in the bank’s bailout.

The payment-processing sector in Europe has been going through a shift in recent years. Many companies have been under bank ownership and private equity firms have been quick to move in and snatch the best deals.

The fact that private equity firms are set to reap plenty of benefits from Worldpay will leave many in RBS embarrassed. For the private equity firm, the exit will be another success story.

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