WorldPay’s Private Equity Investors Likely Gain Additional £700 Million from Visa Deal

Sky News reported that two of the private equity firms, Advent International and Bain Capital, who recently initiated the WorldPay IPO on London Stock Exchange are about to gain an additional US$ 1077 million (£700 million Pound) from Visa Europe’s sale to US based Visa, Inc.

The reason is that WorldPay currently owns a 6 % stake in Visa Europe, which has a market value of $1.26 billion (£815 million Pound). Under the IPO arrangements, 90% of the proceeds from their stake in Visa Europe would actually go to these two private equity firms.

The IPO arrangements specifically says that “With the exception of the 10% interest in the net proceeds from any realisation of the VE shares retained by WorldPay, the ordinary shares will exclude the economic effect of the company’s interest in Visa Europe, and as a shareholder of the company post-admission you will not be entitled to significant benefit from any acquisition of Worldpay’s interest in Visa Europe.”

While the current shareholders of WorldPay will not receiver more than 10% in benefits from Visa Europe, they would likely be served with the liabilities of Visa Europe related settlements and exposed to the subsequent risks.

It is not only WorldPay’s private equity holders who are going to take home the benefits, some of the largest UK banks would also benefit this this changing of hands. For example, Barclays’ and Lloyds’ interest in Visa Europe would also worth several hundred million if the takeover of Visa Europe costs Visa, Inc. over £10 billion Pounds.

“Visa Inc. believes there is compelling logic for both Visa Inc. and Visa Europe to consummate a business combination and therefore regularly engages in such discussions,” said Visa in a statement.

Since 2007, Visa’s operation in the United States and Europe has been run by two separate legal entities. As the payment industry has become more competitive, Visa believes that a combined approach would offer better economies of scale, which in terms help them better compete with key rivals like MasterCard.