Any trader will tell you that, like comedy, one of the secrets of striking a successful deal is down to good timing. RBS, and indeed the Treasury, may be reflecting on this as they digest the details of Worldpay’s sale.
Fidelity National Information Services (FIS) has put an enterprise value of $43 billion, or £32.4bn, on the card payments company just nine years after RBS sold it for a little over £2bn.
Okay, so the sale was forced on RBS as one of the conditions of receiving £45.5 billion in taxpayer support in 2008, and hindsight is a wonderful thing. But consider for a moment that not only does the FIS deal mean that WorldPay is now worth the same as its former parent, but if RBS had held on to it and been today’s seller it could have used that £30bn growth in Worldpay’s value to settle with the UK taxpayer who is still £25.5bn out of pocket on its remaining 62% stake. There would have been a bit of change left over to further boost its balance sheet.
The FIS deal is another transformation in the relatively short life of Worldpay. In the space of four years it has listed on the London Stock Exchange and been sold twice as investors have watched the rocketing value of payments by card.
It will now lose its name as it re-emerges as a company with sales of about $12.3bn (£9.3bn), which is still some way behind RBS (£13.4bn), though I doubt you’ll find an investor willing to bet against the new Worldpay company overtaking that figure some time soon.
This was just one of two mega deals to emerge this weekend, with Commerzbank and Deutsche Bank in talks about a merger. It also heralds a growing shift against the principle of fragmentation in the financial services sector that was popular during the financial crash.
I recall writing at the time that it was naive to call for the break up of the banks (some advocated RBS being turned into a new family of local community banks). Scale has always been a crucial factor in competitiveness and it is no surprise to see growing companies seeking out partners to achieve their ambitions.
As a result, we have seen growing consolidation in which CYBG’s acquisition of Virgin Money and OneSavings Bank’s acquisition of Charter Court are the most recent examples. Despite topping a consumer satisfaction chart Metro Bank’s future is subject to speculation about its operating competence.
The wider financial services market is now evolving into new giant monoliths, with the fund management sector also primed for action.