Mastercard crashes Visa’s party – will a bidding war ensue?
Visa recently made an acquisition bid on British cross-border payments specialist Earthport. The bid looked like a good deal – until Mastercard got involved. Visa’s long-time rival in the cashless transaction segment decided to derail the potential talks with a bid of its own, which values Earthport at 33p per share. That’s a 10% premium over Visa’s offer. Investors responded with interest to the potential bidding war, sending Earthport up by 28% - that’s a clear indication that the market thinks an acquisition will be worth more than what’s already on the table.
Visa and Mastercard’s share prices have been on a roll so far this year
Source: Yahoo Finance
Mastercard’s £233 million offer is the latest move in a flurry of merger and acquisition activity in the payments sector. The reason is simple: technological advancements and consumer preference are pushing us headlong towards a cashless (or at least cash-lite) economy. There’s still a way to go on that journey, but thanks to regular innovation, it’s getting closer every day. And giants like Visa and Mastercard can’t risk being left behind.
Earthport has made its name by being one such innovation. The company lets banks and other financial firms transfer money across borders without the hassle of local regulators and banks in each country. Recently in possession of a new chief executive and finance officer, the company laid out its plans on its most recent earnings call: to be a “bigger and more technologically enabled player in the global payments market.”
Being bought by Mastercard is one way to achieve that goal. In a statement, the larger company said it could “complement and enhance Earthport’s existing capabilities and allow it to accelerate development of a more robust account-to-account cross-border network service.”
Dominion holds Visa and Mastercard in its Global Trends Ecommerce Fund.
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