Nexi buys Nets in $9.2 Billion deal to create payment giant

The combination of Nexi with Nets is a game-changer in the European payments landscape creating one of the largest players in Europe .

Following the announcement made on 2 November 2020, Nexi, the PayTech leader in Italy, and Nets, a leading integrated Pan-European PayTech player, active in 20 countries, announce today that they have signed a framework agreement (“FA”) regarding the combination of the two groups through an all-share merger (the “Merger”).

The Merger, which is consistent with the consolidation process underway at European and global level in the digital payments sector, follows last month announcement by Nexi of the signing of a Memorandum of Understanding in relation to the strategic combination between Nexi and SIA, which is independent of the Merger.

The two transactions are not linked with each other but will each contribute to the ambition of creating a true European PayTech leader.

„Upon closing of the two transactions, the new combined group encompassing Nexi, Nets and SIA (the “New Group”) will become one of the European PayTech leaders with the scale, reach and breadth of capabilities to drive from a leading position the transition to digital and cashless in Europe,” Nexi said.

The CEO of Nexi, Paolo Bertoluzzo, commented: “The transaction, which follows the announced MoU for the merger with SIA, creates the European PayTech leader with unique scale and capabilities to best serve and support all our customers across Europe, from citizens to merchants, from partner banks to corporates, from public administration to other institutions. Nexi will transform into a European leader with access to a fourfold larger addressable market, still largely unpenetrated and growing double digit. The New Group, with reach in over 25 countries, will act as digitalization engine in Europe, driving the transition to digital and cashless.„

The CEO of Nets, Bo Nilsson, commented: “This transaction marks an important milestone in Nets’ journey to become a European payments champion, from our beginning as a domestic player in Denmark and Norway to our evolution into a pan-European payments pure-play operator.”

Nets’ business profile

Headquartered in Denmark, Nets is one of the largest integrated Pan-European PayTech companies with leadership position in the Nordics, one of the most digitally advanced regions globally, as well as in underpenetrated geographies with significant growth potential (such as Germany, Austria, Switzerland, Poland and Southern Eastern Europe).

Through its two business units (Merchant Services and Issuer & eSecurity Services), Nets serves over 740,000 merchant RGUs (1) , over 40 million cards and more than 250 financial institutions and handles over €125 billion card payments annually in the acquiring segment. Furthermore, Nets has developed a strong multi-regional ecommerce offering over the last three years.

Nets was formed in 2010 through the merger of three Nordic payments companies: Denmark’s PBS and Norway’s BBS and Teller. With the acquisition of the leading Finnish digital payments provider Luottokunta in 2012, Nets became the leading pan-Nordic payments player.

Over the past 3 years, under Hellman & Friedman’s ownership, Nets has undergone significant transformation and investments resulting in accelerated growth of its core business, both organically and through strategic M&A. Most recently this included the 2018 merger with Concardis which expanded Nets’ footprint to structurally attractive payment markets such as Germany, Austria, and Switzerland, as well as the expansion into the fast growing Polish market through the acquisitions of Dotpay/eCard, P24, and PeP. Following the sale of Nets’ Corporate Services account-to-account business (“Corporate Services”) to Mastercard for €2.85bn, which is expected to close in Q1 2021, Nets’ model has been successfully refocused on its core businesses, i.e. Merchant Services (62% of 2019 revenues (2), with a strong e-commerce exposure and proposition, and Issuer & eSecurity Services (38% of 2019 revenues – (2)), with key strengths in issuing processing and innovative digital payments methods.

Nets generated €1.1 billion in revenues and €387 million in EBITDA in 2019 pro-forma for the sale of the Corporate Services division and recent acquisitions in Poland6 , with an organic underlying revenues 7 growth of c.8% YoY in 2019. Nets also recorded solid and resilient performance in 2020 despite Covid-19, with organic underlying revenues 7 in Q3 growing c.4% YoY.

Creation of the European PayTech leader

The combination of Nexi with Nets is a game-changer in the European payments landscape creating one of the largest players in Europe. A powerful strategic combination that will allow the New Group to:

. Create the largest pan-European platform with the scale to drive superior product and efficiency leadership, with c.€2.9 billion revenues and c.€1.5 billion EBITDA on a pro-forma aggregated basis for FY 2020E, including run-rate synergies;

. Benefit from significant growth potential from leadership and exposure to attractive European markets (ranging from fast-growing Italy to the structurally attractive Germany/DACH and Poland/CSEE regions to the highly advanced and innovative Nordic markets), with an overall addressable market expanded 4x vs. Nexi standalone to €4.6tn in terms of consumer spend and with an average digital payments penetration of 33%;

. Leverage a full portfolio of solutions across the payment ecosystem, with strong competences in acquiring and e-commerce, and the ability to support international merchants with vertical-specific solutions based on flexible customer journeys across countries, payment channels and rails;

. Create a best-of-breed technology platform leveraging on complementarity and scale, underpinned by >€300m IT & innovation spend per year and >3k product and tech development specialists;

. Achieve superior profitability and cash generation at scale, with enhanced business resilience stemming from geographic diversification, e-commerce exposure and significantly lower customer concentration;

. Be uniquely positioned to capture further organic and inorganic growth opportunities across Europe.

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1) Merchant revenue generating units (RGUs) defined as sum of: acquiring merchants, number of rented terminals and eCom merchants (not adjusted for overlaps)

2) Figures pro-forma for Nets recent acquisitions (i.e.PoplaPay, PeP and PayPro excl. CCV CH) and for the sale of Corporate Services division