Apr 21, 2010

Moneris' bid for RBS Global Merchant Services goes forward

TORONTO--Canada’s Moneris Solutions is in with a chance to further its global expansion ambitions as its bid for UK processor Global Merchant Services goes forward to the second round. The unit is up for sale by the Royal Bank of Scotland (RBS), following a restructuring plan agreed by the UK-based bank with the European Commission.

The main asset held by Global Merchant Services is RBS WorldPay, which operates a number of retailer payment services in 40 countries, including RBS Lynk in the US. RBS says that WorldPay is Europe’s largest acquirer.

Toronto, Ontario-based Moneris Solutions, a payment processing joint venture between Royal Bank of Canada and Bank of Montreal, is one of a group of five bidders selected by RBS. These bidders will now begin a process of due-diligence.

Besides Moneris, other selected bidders include CVC Capital Partners, private investment firm TPG, Warburg Pinchus and a consortium of US private equity groups Advent International and Bain Capital, says Reuters. CVC may be working with Welsh, Carson, Anderson & Stowe, a U.S. private equity firm which owns payment processing business TransFirst, Reuters says.

Trevor LaFleche, Senior Analyst at IDC company Financial Insights, is surprised at the number of buyout firms seeking to “capitalize on the opportunity”. “This is a unique opportunity for existing payment processing players to expand their footprint globally,” he tells Payments Business.

Because of the good business fit, LaFleche expects Moneris to put in a strong bid. The final price for Global Merchant Services is expected to be between £2.5 billion and £3 billion pounds (US$4 billion to US$4.8 billion).

Moneris Solutions has a very limited ability to grow domestically, says Rob Burbach, Senior Analyst at Financial Insights. So he is not surprised to see the company looking aggressively for international growth. “They are following in the steps of Toronto-based Symcor, which has snagged some significant bits of US business in the past couple of years,” he says.

LaFleche says he is “slightly surprised” that existing European payments processors such as Atos Origin, who showed initial interest, have dropped out or been excluded from the bidding.

According to the Wall Street Journal, bids from Chase Paymentech, a payments division of J.P. Morgan Chase, and from Voice Commerce Group, a payments-processing firm set up by the founder of RBS Worldpay, Nick Ogden, also did not make it to the second round.

“The main prize for Moneris would be RBS Lynk, which would be a strong complement to its (Moneris’s) US business,” says David Lott, senior vice president at US consultancy Speer & Associates. “As a major North American processor, it certainly would make sense for Moneris to be in the hunt as well.” However, the case for Europe would have to be more strategic; as it would represent a significant market expansion,” Lott says.



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