Vantiv, Inc. (NYSE: VNTV), a leading provider of payment processing services and related technology solutions for merchants and financial institutions of all sizes, announced today an agreement to acquire Mercury Payment Systems, LLC for an aggregate price of $1.65 billion. Mercury is a payment technology and service leader whose solutions are embedded into point-of-sale software applications and brought to market through their dealer and developer partners. Mercury is currently majority-owned by Silver Lake, a global leader in technology investing.
Click here for the Vantiv investor call notes and analysis of Mike Monocello, Business Solutions' editor-in-chief. "Thoughts on The Vantiv-Mercury Deal"
Vantiv is strategically focused on strengthening and expanding its traditional Merchant and Financial Institutions businesses and continues to invest in strategic partner channels, including integrated payments. The acquisition of Mercury accelerates Vantiv’s growth in the integrated payments space, which is expected to increase significantly over the next several years to potentially represent over 30% of total payments volume by 20171. The transaction results in a combination of leading technology, distribution and scale, which along with Vantiv’s presence in online and omni-channel commerce, significantly increases Vantiv’s penetration into high-growth channels.
“The emergence of integrated payment technology at the point-of-sale delivers a differentiated merchant experience and creates a highly-efficient, cloud-based delivery model for customer acquisition and retention,” said Charles Drucker, president and chief executive officer of Vantiv. “By combining Mercury’s distribution network and innovative solutions with Vantiv’s technology platform and products, we are developing a payments eco-system that allows us to serve these clients in new and exciting ways. Bringing the companies together will dramatically enhance our distribution and technology capabilities to serve a number of large and growing industry verticals.”
Mercury features an extensive network of more than 3,000 point-of-sale software developers and dealers that serve small and medium-sized businesses across the U.S. and Canada. In 2013, Mercury generated net revenue of $237 million, growing by 17% year-over-year, and adjusted EBITDA of $93 million, growing by 23% year-over-year. Given Mercury’s strong double-digit growth, Vantiv expects the transaction to add one to two percentage points to its net revenue growth per year. The transaction is expected to be modestly accretive to non-GAAP earnings per share in 2014, with accelerating accretion in 2015.
"Vantiv and Mercury are aligned in our desire to create integrated software solutions that fulfill the specialized needs of merchants,” said Matt Taylor, chief executive officer of Mercury. “Software developers and dealers are helping to lead the way for the future of payments, and combining with Vantiv puts us in a strong competitive position to jointly offer a broader set of value-added products and services to our partners and merchants.”
“It has been a privilege to partner with Mercury, and we are proud of the company’s accomplishments since our investment in 2010,” said Mike Bingle, a managing director and managing partner of Silver Lake. “Mercury pioneered the offering of integrated payments solutions to merchants and has driven rapid growth by leveraging its large network of partners and pursuing innovative new technologies and services.”
Since 2010, Silver Lake has partnered with Mercury on several initiatives to position the company for long-term growth, including the enhancement of Mercury’s unique technology capabilities and expansion into new product areas, service lines and industry verticals.
Vantiv’s acquisition of Mercury and the prior acquisition of Element Payment Services™, builds upon Vantiv’s existing distribution channels, which will increase the ability to provide an expanded set of payments solutions, such as online and omni-channel commerce, to technology partners and dealers. Mercury further expands Vantiv’s reach into the small and medium-sized business segment through Mercury’s distribution channel, complementary verticals and its ability to design integrated, value-added innovations for the point-of-sale.
The transaction is expected to close in the second quarter of 2014, subject to required U.S. antitrust clearance and other customary closing conditions. Vantiv will fund the transaction with committed financing. Matt Taylor and the Mercury management team will remain with the company, which will maintain its locations in Colorado.
In view of the entry into the transaction, Mercury is suspending activities related to its proposed initial public offering, and in connection with the consummation of this transaction, will withdraw its registration statement previously filed with the U.S. Securities and Exchange Commission.
Credit Suisse acted as lead financial advisor and BofA Merrill Lynch also acted as financial advisor to Vantiv, and Wachtell, Lipton, Rosen & Katz served as its legal advisor. Morgan Stanley was the lead M&A advisor to Mercury. Mercury was also advised by JP Morgan, Barclays, and FT Partners. Simpson Thacher & Bartlett LLP acted as legal advisor.
Vantiv and Mercury will host a conference call to provide additional details, today at 5:00 PM EDT. The conference call can be accessed live over the phone by dialing +1.800.289.0746, or for international callers +1.913.312.0839, and referencing conference code 6629583. A replay will be available approximately two hours after the call concludes, and can be accessed by dialing +1.888.203.1112, or for international callers +1.719.457.0820, and entering replay passcode 6629583. The replay will be available through Monday, May 26, 2014. Presentation slides to be discussed during the conference call will be available for download prior to the call on Vantiv’s investor relations website at http://investors.vantiv.com/.
Click here for the conference call notes and analysis of Mike Monocello, Business Solutions' editor-in-chief. "Thoughts on The Vantiv-Mercury Deal"
1McKinsey 2012 Payments Study