Natixis is trying on some ill-fitting fintech clothes. Merging its small payments business with a trendier rival makes sense. But 3.9 billion euro French compatriot Ingenico has one of the most dowdy looks in an otherwise chic sector.
The 17 billion euro investment bank is giving itself an M&A makeover. Last month it unveiled plans to sell some lending businesses worth 2.7 billion euros to unlisted parent company BPCE, and plough money into less capital-intensive activities like asset management. On Thursday, the Paris-based outfit said it was exploring a deal with payments group Ingenico.
An outright acquisition is probably off the table. Natixis’ M&A war chest of 2.5 billion euros would cover only half the potential outlay, assuming a 30 percent premium to Ingenico’s Wednesday closing price. That could require Chief Executive Francois Riahi to ask shareholders to cough up – despite having promised to return any spare capital to them.
Natixis is more likely to merge its payments arm – which reported 336 million euros of net revenue in 2017 – into Ingenico, whose sales last year were 2.5 billion euros. That’d give the bank a minority share of a bigger, publicly-listed payments specialist. Investors might then find it easier to value the division, boosting Natixis’ own rating. Payments companies typically trade at much higher multiples than banks, and Natixis is currently worth just 9.8 times forward earnings, according to Refinitiv data.
Still, Ingenico is about as unsexy as payments companies get. It is valued at 12.5 times forward earnings, according to Refinitiv, a huge discount to Worldpay and Worldline’s multiples of 20 and 30 times respectively, let alone market darling Adyen, currently worth more than 100 times forward earnings.
Ingenico’s traditional focus has been selling hardware like card machines, a much slower-growing slice of the market than the acquiring business that Adyen and Wirecard specialise in, which involves selling software to merchants to process payments. Ingenico is pushing into that business too, but is growing more slowly than peers, and competition is likely to hot up as the sector consolidates. Before Thursday’s surge, its shares had fallen by a third this year. Natixis’ shareholders shouldn’t expect much of a lift.
