MasterCard agrees £700m VocaLink acquisition
21 July 2016 | 14470 views | 15
MasterCard has agreed to pay about £700 million to buy 92.4% of VocaLink, the bank-owned operator of the UK's Faster Payments system and Zapp mobile service.
Under the definitive agreement, VocaLink's existing 13 bank shareholders are also in line for a potential earnout of up to £169 million if performance targets are met.
Philip Hammond, the UK's new Chancellor of the Exchequer, welcomed the move, saying: "MasterCard's decision to buy VocaLink shows that Britain remains an attractive destination for international investors. Britain is and continues to be an open and globally facing country in which to do business."
The deal comes just months after the UK's Payment Systems Regulator (PSR) said banks should sell their stakes in VocaLink to help increase innovation and competition in the nation's critical payments infrastructure.
The London-based group operates BACS, the ACH enabling direct credit and direct debit payments between bank accounts, as well as the Faster Payments scheme and the Link ATM network. This means that it processes over 90% of salaries, more than 70% of household bills and almost all state benefits. Nearly every business and person in the UK uses its technology and last year the company processed over 11 billion transactions with a value of £6 trillion, generating revenues of £182 million.
The PSR believes that the common ownership of VocaLink by a small number of banks is having a "negative impact on innovation and competition in the industry".
MasterCard says that the acquisition "accelerates MasterCard’s efforts to be an active participant in all types of electronic payments and payment flows".
In particular it means getting hold of VocaLink’s Immediate Payments System, which is live in Singapore and has won deals in the US and Thailand, and the Zapp system, which would give the card scheme a new route into UK debit payments, currently a Visa stronghold.
Ajay Banga, president and CEO, MasterCard, says: "VocaLink is a unique company with outstanding technology, assets and people. We look forward to investing in and maximizing the technology, and embedding it in our products and solutions, both in the UK and around the world."
David Yates, CEO, VocaLink, who will join the MasterCard management committee, adds: "Today’s announcement is positive news for our partners, customers and employees. We will continue to focus on ensuring that the UK systems perform seamlessly, maintaining the highest levels of quality. At the same time, we’ll invest in further innovation to power competitive payments solutions for consumers and businesses around the globe."
The deal, which sees the current shareholders retain 7.6% ownership for at least three years, is expected to close in early 2017 and to be dilutive for up to 24 months after this.