Advent International, ATP and Bain Capital (the "Consortium") have today signed an agreement to acquire 100% of the share capital of Nets from the existing shareholders, a group of 186 primarily Danish and Norwegian banks, for a cash consideration of DKK 17.0 billion, corresponding to a price per share of DKK 92.37.
In addition, the shareholders will receive the dividend for 2013 totalling DKK 498 million, or DKK 2.70 per share. The transaction is subject to regulatory approvals/confirmations and is expected to close in the second quarter of 2014.
Nets, headquartered in Copenhagen, is a leading Northern European provider of payments, information and digital identity solutions. Founded in 1968, Nets has a strong history of securely handling payments transactions. Nets employs 2,600 employees in five countries (Denmark, Norway, Finland, Sweden and Estonia) and connects banks, merchants and businesses through its network. In 2013, the company handled more than 6 billion card transactions supporting more than 33 million payment cards and over 500,000 merchants in the Nordics.
Peter Lybecker, Chairman, Nets: "Today's announcement has been preceded by an extensive review of Nets' strategic alternatives. The outcome of this review was that Nets needs a new owner with the expertise, commitment and financial resources to develop the business in a rapidly changing payments industry. The overriding focus for the Board of Directors of Nets has been to select the best owner out of many interested parties with a clear understanding of the role Nets plays in society, including the importance of developing Nets' unique sector solutions such as Dankort and BankAxept and the need for safeguarding data."
"I am confident that we have found a highly qualified owner of Nets in the Consortium consisting of Advent International, ATP and Bain Capital, which balances strong local support and understanding with extensive global expertise in the payments sector. On behalf of the shareholders, we look forward to working with the new owner as ongoing customers and strategic partners."
Leif Teksum, Deputy Chairman, Nets: "We are pleased with the outcome of the process to have found a highly experienced group of investors that are well-positioned to further enhance Nets' offoffering to the benefit of all stakeholders. The shareholders and the Board of Directors have carefully considered the implications of an ownership change in Nets as well as the suitability of a number of potential buyers. We are satisfied that the existing regulatory framework around Nets will be upheld and that we have robust contracts in place around critical infrastructure services that will be honoured by the new owner."
Strong local knowledge and support
Advent International and Bain Capital have made numerous direct investments in the Nordic region over the last 20 years, and ATP, based in Denmark, manages DKK 593 billion in pension savings for 4.8 million Danish citizens. Each have made significant financial commitments to the investment in Nets, and the future board will consist of European nationals from Advent International, ATP and Bain Capital as well as independent members and employee representatives.
Carsten Stendevad, CEO, ATP: "For ATP this represents a significant investment which we believe will create substantial value for our members. We see a compelling investment opportunity to transform Nets from a strong Nordic company into a Northern European leader within the payments industry, headquartered in Denmark. We are pleased to partner with Advent International and Bain Capital who bring deep insight into the industry and we look forward to playing an active role in growing and improving the business."
Extensive global expertise in the payments sector
Advent International and Bain Capital are long established private equity firms, each with 30 year track records. Combined, they form the most experienced private equity investor in the payments sector globally, having completed over 20 investments across multiple geographies and in many subsectors of relevance to Nets. In addition, their experience of working with bank shareholders in similar transactions enables them to ensure a smooth transition in ownership.
James Brocklebank, Managing Partner and Head of Advent International's financial services sector team in Europe: "We are proud to have been selected as one of the new investors in Nets, and we will put our resources, sector expertise and relationships to work to benefit the company's customers, employees and other important stakeholders. We are well aware of the responsibilities that come with ownership of a critical infrastructure provider as we have a strong track record of investing in and growing similar businesses in Europe and globally."
Robin Marshall, Managing Director and Co-Head of Bain Capital's financial services team in Europe: "Nets is a household name across the Nordics with a strong reputation built on a foundation of trust. Our history of working with similar businesses has taught us that a reputation for operational reliability and rigorous data protection is hard won and easily lost, and both will be absolute priorities for us in the years ahead. We bring a strong pool of operating resources and are committed to supporting the company's management in accelerating the growth and maximising the potential of Nets."
Background and rationale for sale
Nets operates in an industry that is currently undergoing significant change. The payments sector is characterised by increasing competition, globalisation, consolidation and regulation. Such forces present both risks and opportunities. Scale, efficiency, innovation, technology capabilities and a relentless customer focus are key success factors for payments companies in the current environment.
Against this background, Nets has taken a number of steps to protect and enhance its strategic position. In 2010, Nets was created in its current form through the merger of Norwegian Nordito (parent company of BBS and Teller) and Danish PBS. In 2012, the company's pan-Nordic platform was further expanded through the acquisition of Finnish payments company Luottokunta. At the same time, Nets has become a more commercial, efficient and customer oriented business operating at arms-length from its bank shareholders.
As the pace of change in the industry accelerates, it has become increasingly evident that the current ownership and governance model with its current 186 bank shareholders, acting at the same time as owners, customers and in some areas competitors of Nets, is suboptimal. To remain competitive, Nets needs clear governance and streamlined decision making with a commitment to make necessary investments in IT and technology.
As a result, the Nets Board of Directors conducted a review of strategic options last year, following which a sale process was initiated. The sale announced today is a logical next step in making Nets truly independent and allowing it to realise its ambitious strategy.
There will be no change to the existing regulation of Nets, and Nets will continue to be supervised by the respective Danish, Norwegian and Finnish FSAs and competition authorities. Equally, the requirements for Nets with regard to data protection are unaffected by the ownership change and the Consortium will implement additional measures to safeguard Nets' data privacy profile.
Development plans and stakeholder impact
Following the merger between PBS and Nordito in 2010 and concurrent with the recent review by the Board of Directors, the management team have refined their strategic vision and are in the process of executing an agenda of growth and continuous operational improvements. The Consortium is fully supportive of the company's strategy and its role as provider of critical infrastructure services. It intends to preserve Nets' strong Nordic identity with headquarters in Denmark. There are currently no plans to merge Nets with any of the Consortium's other payments investments.
The Consortium is looking forward to working with all of Nets stakeholders and recognises that Nets is a trusted service provider to the majority of the Danish, Norwegian and Finnish populations. The Consortium recognises Nets' experienced and competent staff with strong skills and the important role they play in executing the existing strategic plan.
The Consortium furthermore anticipates there will be no changes to customer relationships, and Nets' close, day-to-day collaboration with its current customers will continue, while sector solutions are secured by long-term contracts to protect the continuity of the services. The Consortium is committed to investing in and supporting Dankort, Betalingsservice, NemID, BankAxept and BankID going forward.
The Consortium believes the transaction is an ideal situation for private equity to add value in formally transitioning the company to independence and implementing a supportive corporate governance structure. The Consortium has a long-term perspective and typically holds investments between 5 to 7 years. While the timing and manner of exit is hard to predict, the Consortium currently envisages a future listing of the company's shares on a local exchange when the company is ready.
About the Offer
The Consortium is offering a cash consideration of DKK 17.0 billion for 100% of the share capital of Nets Holding A/S, corresponding to a price per share of DKK 92.37.
In addition, the shareholders will receive the dividend for 2013 totalling DKK 498 million, or DKK 2.70 per share. The Board of Directors of Nets unanimously recommends the shareholders to accept the Offer. Shareholders representing more than 90% of the shares and voting rights have signed irrevocable undertakings to accept the Offer.
The transaction is subject to regulatory approvals/confirmations and is expected to close in the second quarter of 2014.
J.P. Morgan acted as financial advisor to the Board of Directors of Nets. UBS, MHS Corporate Finance and Infima acted as financial advisors to the Consortium.
Gorrissen Federspiel (Denmark), Bech Bruun (Denmark), BAHR (Norway) and Roschier (Finland) acted as legal advisors to the Board of Directors of Nets. Kirkland & Ellis (Global), Accura (Denmark), Hannes Snellman (Finland) and Wiersholm (Norway) acted as legal advisors to the Consortium.