Mastercard crashes Visa’s party – will a bidding war ensue?
Select language to see a machine translation of this article. The original language of the Article is English and the translation is provided for your convenience.

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

graph 28 mastercard

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.”

Disclosure

Dominion holds Visa and Mastercard in its Global Trends Ecommerce Fund.


If you would you like to receive the Newsfeeds daily, please click here to sign up now!

Help us make this Newsfeed better by rating this article. 1 star = Poor and 5 stars = Excellent
0.0/5 rating (0 votes)

Disclaimer
The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.