Just had a fascinating chat with Nick Ogden, founder and CEO of Voice Commerce and previously RBS WorldPay which is now part of RBS Global Merchant Services (GMS). As mentioned last week, Voice Commerce is one of the organisations bidding for RBS GMS, now that it is up for sale again, and this week was told that their bid has been rejected.
Here’s the detail.
It was a fully funded cash bid, comprising a group of investors and a major UK listed entity. The bid was “north of £1 billion and south of the £2 billion mark”.
The bid would have made RBS GMS a UK-listed company, with Voice Commerce merged into it.
In addition to the cash, RBS would have retained an equity stake shareholding in the new business, which would have moved RBS into new markets with new technology. This was a particular focal point for the bid, as Voice Commerce would have integrated voice biometric authentication into the RBS GMS merchant processing epayments business.
It was also a stand-alone bid, rather than being some group of partners or partnerships. Apparently, the seventeen expressions of interest included many consortia of Private Equity (PE) and Venture Capital (VC) firms.
The Voice Commerce bid received “full marks for management and technology, but was too low and our aspirations are higher” according to a letter Nick received from UBS, the bank advising on the M&A process to RBS.
So what happens next?
UBS is narrowing bidders to around three or four for a second round of evaluation. These bidders will then enter a due diligence process, with the view to completing the final round of bidding within the next eight weeks or so.
Of particular note is Nick’s valuation of the business, bearing in mind that he founded WorldPay and sold it to RBS in 2002. Nick therefore has a “good understanding of that business worldwide and it will be interesting to see the final valuations and whether they have that same level of understanding.”
Meanwhile, Voice Commerce is looking elsewhere for acquisitive growth with a focal point around distribution. That’s what they wanted from RBS GMS – the 500,000 merchants and their customers – and could lead Nick to look at companies such as Heartland.
Nick would only say they are looking around America, Asia and the Middle East as, having received their PSD approvals in the EU, he wants to take their PSD and Visa authorisation overseas as a critical differentiation point. Equally, he believes that “the emergence of IP-based POS means significant changes will occur with merchant acquiring” over the next few years, and Voice Commerce is ideally positioned to capitalise upon this.
Watch that space, and also the RBS GMS deal. This could get interesting.
From the Financial Times:
Moneris enters the fray for RBS unit
By Martin Arnold and Patrick Jenkins
Published: April 15 2010 23:19 | Last updated: April 15 2010 23:19
Moneris Solutions, the Canadian card payments company, is a surprise bidder for Royal Bank of Scotland’s Global Merchant Services division, as the auction of the business moves into its final stages.
The £2.5bn ($3.9bn) operation, centred on the WorldPay payments business and incorporating the Streamline cards operation that dominates the UK market, is one of the assets that RBS must sell under the terms of a European Commission state aid ruling. The government has a shareholding of 70 per cent in RBS after bailing it out last year.
Toronto-based Moneris, a joint venture between Royal Bank of Canada and Bank of Montreal, provides credit card payment processing to more than 350,000 North American merchants.
RBS plans to invite a small group to join Moneris in the second round of bidding for Global Merchant Services, out of the more than a dozen bids it received earlier this month.
The other bidders that are moving into the second round include CVC Capital Partners, the UK-based private equity group, and a consortium of US private equity groups Advent International and Bain Capital.
Talks were still being held on Thursday night by RBS on whether to include others in the final round, such as a consortium of Silver Lake, the technology focused US private equity group, and Tsys, a rival US payment services group. Other private equity bidders thought to still be in the fray include TPG, Carlyle and Permira. Groups no longer in the running include JPMorgan Chase Paymentech, Atos Origin of France and Apax Partners, the UK private equity group.
Advent believes it may have an edge as it bought 51 per cent of the credit card processing unit of Fifth Third Bank a year ago in a $2bn (£1.3bn) deal. The US arm of Global Merchant Services could be combined with Fifth Third’s business.
Moneris has held talks about joining forces with one of the private equity group bidders, but without reaching an agreement.
Global Merchant Services generated operating profits of £249m last year. RBS has agreed to provide vendor financing on the deal alongside Goldman Sachs, people close to the deal said.
RBS and the bidders all either declined to comment or could not be reached.