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‘House of cards’: Worldline can be fit for M&A battle after slimdown


Strategic withdrawal can lead to a better attack. Worldline, a $26 billion Paris-listed payments firm, is looking at selling its hardware unit. The sale would increase both its shares as well as Chief Executive Gilles Grapinet’s M&A war chest. This would help him fight against Italian rival Nexi.

Worldline has enjoyed the benefits of the pandemic. It helps banks and merchants process cashless payments. As lockdowns hit, consumer demand fell. However, the percentage of card transactions from which the company takes cuts grew as customers ditched paper and coins.

This accelerated shift away from cash will also increase the competition for scale in Europe’s so-called Playtech market. The Milan-listed Nexi bought Nordic group Nets from the Milan Stock Exchange and acquired peer Sia. Worldline purchased Ingenico for 8 million euros. Regional banks may sell more payments units to larger players like Worldline’s acquisition, which was announced Tuesday by Swedish lender Handelsbanken. Grapinet should take a second glance at his terminals division which is slower growing and provides devices for card payments in shops.

UBS forecasts suggest that a buyer, such as a private equity group, would pay 11x this year’s adjusted EBITDA. The terminals unit could be worth 4.5 billion euros. UBS estimates that Worldline’s core payment business could be valued at 26 billion euros if it is placed on the same forward EBITDA multiple of rival Nexi, as well as its financial services unit, which would give Worldline’s core payments company a 31-fold multiple. Add 2.9 billion euros net debt to Worldline, plus cash from terminals disposal, and Worldline should have equity worth 28 billion euros. This is nearly one-quarter of its current market capitalisation.

In the search for new targets, disposal could be handy. According to Refinitiv data, Worldline’s net debt amounts to 2.3 times forward EBITDA. This limits its ability to make large acquisitions. The French group could be more able to defend Nexi’s debt, which is almost three times forward EBITDA. Worldline’s stock would be more attractive if it were able to get rid of the terminals business.

Grapinet will complete his terminals unit review before the end of this year. Grapinet should not wait as dealmaking in this sector is speeding up.