MasterCard watching for processing deals

Provided exclusively by Mergermarket

MasterCard (NYSE:MA), headquartered in Purchase, New York, is interested in acquiring processing assets in countries where it sees fewer transactions, according to CFO Martina Hund-Mejean.

At Tuesday’s JPMorgan Global Technology, Media and Telecom conference, hosting analyst Tien-tsin Huang noted that there had been some press speculation about MasterCard looking at an infrastructure deal in the UK and asked the CFO if the company needed to beef up its infrastructure in Europe.

“We are always looking at M&A opportunities in certain areas,” Hund-Mejean replied, noting that one of these was processing. “And we have been doing actually a number of processing deals over the last three years or so.”

The CFO noted that while these deals had been on the smaller side, MasterCard had been investing a huge amount in the processing assets put together under the leadership of President, MasterCard Processing Cathy McCaul.

“You should expect us to continue to look for those type of assets which you can on the processing side, you can call it as infrastructure assets,” Hund-Mejean continued. “Obviously, we have the financial wherewithal to do it, but I think you are going to have to be very competitive in all means and everywhere in the world. And I would not just say that this is a European focus. For us, it’s a focus in every country where we might not see as many transactions as we would like to see.”

She explained that MasterCard needed to see the data of transactions that were taking place in a different way, particularly in countries in which it had a low market share, so that the company could provide value-added services in the information services arena.

“You might have seen that some of our revenue line items have been increasing very nicely, much due to the fact of our sale of our fraud products,” the CFO added. “Again, you cannot do that unless you see the transaction, so that’s from a big picture point of view, our strategic focus.”

MasterCard Processing consists of three business units: Payment Gateway Services, Payment Transaction Services and Prepaid Management Services. Under Cathy McCaul’s direction, the team evaluates joint ventures, equity investments and acquisition opportunities.

Recent reports

A published report last month said MasterCard was in exclusive negotiations to acquire payments processing company VocaLink. Insiders cited by the report said any deal would probably value UK-based VocaLink at about GBP 1bn (USD 1.5bn).

Previously, a published report in early March said VocaLink was on the receiving end of a takeover offer by MasterCard, adding that the latter had mandated Citi. Citing people close to the company, the March item said it was MasterCard’s intention to acquire at least a partial stake in VocaLink. MasterCard declined to comment, while VocaLink could not be reached for comment, according to the report.

At the Barclays Emerging Payments forum later that month, hosting analyst Darrin Peller noted that recent news reports suggested MasterCard was looking at potential acquisitions in Europe, and asked CEO Ajay Banga to comment on the company’s M&A strategy going forward.

At that conference, the CEO said it would focus deals around building capabilities that would take a long time to build organically, citing the purchases of C-Sam and Pinpoint as examples. Banga also pointed to the services sector as an area of potential M&A interest.

MasterCard’s last sizeable deal was the April 2015 purchase of Virginia-based cloud analytics provider Applied Predictive Technologies (APT) for USD 600m.

Pinpoint, a provider of loyalty and rewards services to financial institutions, and C-SAM, a provider of mobile wallet and on-device software and services, were bought in separate transactions in 2014. The terms of the deals were not disclosed.

Guggenheim Partners was used for APT, along with Davis Polk & Wardwell. The latter was also used for an earlier domestic acquisition, according to the Mergermarket M&A database.

KPMG advised on Pinpoint and C-SAM, with Baker & McKenzie and McDermott Will & Emery used for legal on the two deals, respectively.

MasterCard has a market capitalization of USD 106bn.

As seen in the mergermarket newsletter on 25/05/2016

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