Tuesday, October 27, 2020

Italian digital payments firms merge to create $17.6B fintech group

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Italy’s largest payments firm Nexi has struck a deal with its rival, SIA, to create a digital payments behemoth with a market cap of 15 billion euros ($17.6 billion). It’s estimated the new entity will take a domestic market share of 70%.

According to a report from Reuters on Oct. 5, the all-share agreement will give Nexi roughly 70% of the newly merged company, with SIA having an equity value of 4.6 billion euros ($5.4 billion). Nexi’s private equity owners Advent, Bain Capital and Clessidra will own 23% of the newly created fintech group.

On the eve of the deal’s finalization, the Financial Times had characterized the merger as heralding the potential creation of “one of Europe’s largest fintech groups.”

Cointelegraph has previously reported on Nexi, which was involved in a major pilot for a blockchain-powered interbank system in Italy back in 2018. Nexi is focused on the Italian market, whereas SIA has generated a third of its revenue overseas. Both Nexi and SIA are based in Milan, and talks are reported to have taken over 18 months, beset by lingering indecision over governance terms and valuations.

Nexi CEO Paolo Bertoluzzo said in an official statement that the merger will create “a large Italian PayTech company leader in Europe […] with scale and capabilities to play an increasingly leading role in Italy and at an international level in a market, like the European one, that sees strong consolidation trends.”

Reuters notes that the COVID-19 pandemic is expected to prompt a surge in digital payments in Italy, which has until now trailed other European countries in transitioning away from cash.

The merged entity, with Bertoluzzo remaining as CEO general manager, will handle payments for roughly 2 million merchants and 120 million cards: over 21 billion transactions per year.

Subject to certain conditions, the merger is set to be completed by the summer of 2021.

In merger negotiations, Bank of America, Mediobanca and HSBC acted as advisors for Nexi, with JPMorgan and Rothschild representing SIA.

As reported earlier this year, consolidation in the digital payments sector has been strengthening. In February, French fintechs Ingenico and Worldline merged to create the world’s fourth-largest payments firm.

Like the wider fintech space, the blockchain industry has also seen its share of mergers and acquisitions. Last August, Consensys bought out JPMorgan’s enterprise version of the Ethereum blockchain, Quorum.  Binance acquired CoinMarketCap and Indian exchange WazirX, while United States exchange Coinbase has similarly acquired smaller platforms. In winter 2019, two major mining firms entered a merger agreement to create what they purported would be the world’s largest mining firm.