Banco Sabadell has confirmed a Reuters report that it is running a process to sell its merchant acquiring business for around €400m.
Sabadell is believed to be insisting on a trade buyer for the unit. Having ruled out a sale to private equity, three international processors – Nexi, Worldline and Fiserv – are reportedly still in the running to buy Spain’s second largest merchant acquirer which accounts for 16% of the market. The EBITDA multiple is not available, but the suggested sale price of €400m suggests a very similar valuation to Bankia, another merchant acquirer, sold to a Global Payments JV in 2021.
Spain’s domestic payment industry has had a difficult couple of years. The merchant acquirers are more tourism dependent than most. Many were badly hit by the pandemic and associated travel bans but business has since bounced back as borders reopened. With total payment volume of c.€258bn and strong cash to card trends, Spain remains a very promising market for inward investment.
Sabadell’s payment volume was up 31% in the twelve months to June 2022 at €41.9bn with 14% of volume as eCommerce according to Nilson. Sabadell has 438K points of sale (physical and online) across 214K merchant outlets. Revenue for the whole cards business (issuing and acquiring) was up 14% in H1.
Sabadell is outsourcing merchant acquiring primarily because it needs to raise extra capital to support its transformation plans. Outside Spain, Sabadell partners with EVO Payments in Mexico and Square in the UK, through its TSB subsidiary.
In Spain, the successful bidder will likely also get a long-term partnership arrangement with Sabadell for lead referral. This will help the bank maintain its customer relationships and prevent a competitor bank using merchant acquiring to establish a bridgehead with Sabadell’s merchants.
None of the three suitors has much business in Spain today. For each, the deal would represent a springboard into one of Europe’s largest payment markets helped by a strong distribution partnership with this leading retail bank with over 1,500 branches. For Fiserv, Worldline or Nexi, the business case to buy Sabadell’s merchant acquiring unit is primarily about cutting costs through consolidating processing and product development with their other European businesses. There will also be opportunities to sharpen up local sales and marketing and introduce leading products from other markets such as Clover.
Nexi and Worldline are both highly acquisitive. Nexi has recently bought merchant service businesses from banks in Croatia and Greece. Worldline has made two purchases in Greece and set up a JV with ANZ in Australia.
According to Reuters, the Sabadell board has already reviewed offers and will move quickly to the final stages of the auction.
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[…] improved market share, payment volume and fee income. Worldline, Nexi and Fiserv are all reported to be in the running to pay about €400m for Spain’s largest independent merchant acquirer. Sabadell’s CEO, Cesar Gonzalez-Bueno, said […]