Mastercard buys VocaLink stake for £700m

LONDON: Mastercard Inc agreed to buy a controlling stake in VocaLink Holdings Ltd, the payments processor that handles most payroll and household bill processing in the United Kingdom.

Mastercard would pay about £700 million (RM3.73 billion) for 92.4 per cent of the firm, said the company on Thursday.

VocaLink’s existing shareholders, which include 13 banks and building societies, will retain 7.6 per cent ownership and can receive as much as £169 million more if performance targets are met.

VocaLink primarily processes non-card electronic payments in the UK, where the firm generates more than 90 per cent of its revenue.

The firm is developing a faster system for the bank-owned automated clearing house payments network in the United States, a capability that would allow Mastercard to better compete in the growing business-tobusiness and person-to-person payments markets.

“We will be able to build on the base that VocaLink has been building in the UK and take this around the world,” said chief financial officer Martina Hund-Mejean in a telephone interview.

VocaLink processes more than 90 per cent of salaries and more than 70 per cent of household bills in the UK, according to the statement.

It also handles communications between almost all of the country’s 67,000 automated teller machines.

The deal will give Mastercard, the second-largest US payments network, more of a foothold in Britain after larger rival Visa Inc boosted its presence there with the purchase of Visa Europe for more than US$20 billion earlier this year.

“We view it as a positive that Mastercard was able make this acquisition of assets with fairly substantial potential, particularly as it relates to gaining a bigger foothold in the UK market,” said Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods.

Mastercard shares declined one per cent to US$92.37 at 2.17pm in New York. The stock slid 5.1 per cent this year, compared with the 4.4 per cent advance of the 92-company S&P 500 Financials Index.

The all-cash transaction was expected to be a drag on profit for as long as two years after the deal was completed, said Mastercard. If the purchase closes in early next year, the company estimates it would reduce earnings per share by US$0.05 next year and in 2018.

David Yates, VocaLink’s chief executive officer (CEO), will continue at the company as chairman and join Mastercard’s management committee. Paul Stoddart will become CEO. Bloomberg