Partnerships / Acquisitions

Earthport: ‘Yes’ To Mastercard’s Higher Bid On Heels Of Visa’s Offer

Earthport Accepts Mastercard's Bid Over Visa's

Bidding wars can be a breathtaking sight on Wall Street.

One firm sets the bar, with an offer to buy a targeted company. The courted firm says, “sure, let’s get hitched.”

Then up rides a sparkling new suitor, upping the ante, sweetening the bid. Perhaps – since this is the corporate world – a more appealing strategic fit is in the offing. Then the firm that started it all with the original offer comes back and tops that second bid. Then, maybe there’s a third interested buyer, and maybe … the bidding war continues. Hundreds of millions of dollars hang in the balance and will change hands. Maybe even billions of dollars. Pretty soon, you are talking about real money.

Oh, and investors are watching all of this, bidding up stocks in the meantime, maybe pouring money into a space that had heretofore been a sleepy little outpost of the stock market, in effect jump-starting activity.

So may be the case as the investment world came into Friday’s trading to see that Mastercard made a $305 million overture (or 233 million pounds) to buy the U.K.’s Earthport, which had already been approached by Visa. The Mastercard offer is a 10 percent premium to Visa’s.

Two card giants, sweetening the pot, taking aim at one another, it seems, across the pond. The clearest winner here is Earthport (and holders of Earthport’s investors), whose shares at this writing are up more than 29 percent, tacking on tidy gains to shares that have already more than quadrupled since the Visa offer seen last month.

For Visa and Mastercard, the lure is in cross-border payments. Earthport makes its home in the remittance space, allowing digital, API-enabled transfers of money that are cheaper than might be seen with more traditional money transfer services. A single point of contact, rather than a plethora of payment channels, allows for better speed and transparency in getting money to points around the globe.

Visa, of course, wants to have a bigger stake upon an ever more global stage. Visa’s cross-border payments volume has been growing by double digits, at 10 percent, as shown by its most recent quarterly results. Mastercard said in its latest report that cross-border dollar volume fees were up 18 percent on a currency-neutral basis, year on year, to $1.3 billion.

So, billion-dollar businesses and double-digit growth are amid the sea change of technology. The couple of hundred millions of dollars to be spent on Earthport seems a drop in the bucket for firms with several billion dollars in cash on their respective balance sheets.

For now, Earthport has given the thumbs-up as of Friday morning to the Mastercard offer, and has withdrawn support for the Visa bid. Might a counteroffer come?

The Bigger Picture

Maybe, but maybe not. Seems clear, though, that the “buy vs. build” debate is getting settled firmly in the camp of … buy.

Because: It’s quicker to buy, and right now, money (or stocks) may be as cheap as it can be to spend (as rates are only going to get higher – and in the markets, the only certainty is the stock price you see flashing right now) … and, well, payments is changing.

For further proof that the wallets are opening on the Street, in payments processing especially, consider the fact that just a few weeks ago, we saw a mega deal struck as Fiserv said it would buy First Data in an effort to create a processing giant.

The heads are turning, and the tide may be turning for the space. The nuts and bolts of sending money hither and yon may prove attractive as iPhone-driven fortunes come and go with fickle consumers. Who needs FAANG with its Sturm und Drang?

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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