Banco BPM shares rise after payments deal with FSI (updated)
17/07/2023 09:12
(Updates shares, adds deal detail, analysts' comments)
MILAN, July 17 (Reuters) - Banco BPM BAMI.MI shares
rose as much as 2.7% on Monday after Italy's third-largest bank
said it would sell 71.6% of its card and shopowner payments
operations to private equity fund FSI for 500 million euros
($561 million) in cash and shares.
Banco BPM said late on Friday it would receive an initial
cash payment of 200 million euros as well as a 28.6% stake in
the new payments venture it is setting up with FSI, indicating
its holding would be worth 300 million euros.
An earn-out mechanism could bring the overall value of the
sale to 600 million euros, the companies said.
"This payment agreement paves the way for a share buyback in
2024" of up to 500 million euros, boosting earnings per share by
8% in 2025 based on current trade price, said JP Morgan in a
note.
Barclays said the agreement is "positive on all fronts" as
it will favourably impact the bank's capital generation and
profits, and help BPM take advantage from the future growth of
the payments business.
Banco BPM shares were up 2.1% by 0802 GMT, topping Italy's
blue-chip index, which was trading up 0.1%.
The transaction values the new joint-venture at around 15
times its core profit, people familiar with the deal said. That
is almost twice the valuation multiple at which market leader
Nexi NEXII.MI trades.
Nexi, which currently partners with Banco BPM, had vied for
the contract with rival Worldline WLN.PA , but Europe's top two
payments firms lost out to smaller rival BCC Pay, the payments
business of FSI and unlisted cooperative bank ICCREA.
Banco BPM's is the last significant asset of this kind left
to buy in Italy, which bankers said pushed FSI to outbid rivals
to gain scale in a fast-growing sector.
Given its nature of private equity fund, FSI will eventually
need to liquidate its holding and is betting on cost cuts and
business growth.
Banco BPM, which is already a minority investor in other
fee-earning businesses, such as insurance or consumer credit,
said the deal would boost its best-quality capital by nearly a
third of a percentage point.
That could rise to half a percentage point depending on the
earn-out price mechanism.
BCC Pay currently handles 60 billion euros in cards and
shopowners transactions, compared to Banco BPM's 30 billion
euros.
Banco BPM said in a joint statement with FSI and BCC Pay
they were creating the country's second-largest payments group.
The national champion, Nexi handles 181.5 billion euros in
merchants' transactions, of which 102 billion euros is in Italy,
plus 204.2 billion euros in cards' transactions, with 116.8
billion euros in Italy.
Migrating Banco's current clients to FSI will take several
years and exposes the new venture to the risk of losing clients
to Nexi and its other banking partners, with analysts pointing
to Nexi's wider commercial offer and stronger pricing power.
($1 = 0.8910 euros)
(Reporting by Valentina Za; Editing by Federico Maccioni and
Mike Harrison)
((valentina.za@thomsonreuters.com; +39 02 6612 9526;))