Berenberg downgrades Worldpay after bid approaches
Berenberg downgraded Worldpay to 'hold' from 'buy' but lifted the price target to 450p from 327p following news on Tuesday that the payments processor has received preliminary approaches from Vantiv Inc and JPMorgan Chase Bank.
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It said it was downgrading the stock as it reckons offers could reach its new target price.
The bank said it wasn't surprised by the interest shown or the timing of the bid, as it had already said that Worldpay would be the perfect target for a US acquirer. It pointed out that both Vantiv and JPMorgan are suffering from excessive exposure to the offline US market, and Worldpay would give them international ecommerce capabilities that they would be able to cross-sell to their US client base.
"They would inherit a strong UK business which, leaving aside the risk of a UK consumption slowdown, is well run and performing well. And they would acquire a small and underperforming US business that they could easily integrate into their much larger US operations."
Despite that rationale, Berenberg said investors were likely to have a number of key questions.
"Could another bidder emerge, such as Global Collect, First Data, PayPal or Apple? What might the strategic premium be? Can the bidders afford it? Which one of them would be willing to pay the most? Should investors sell? Why did Vantiv and JPMorgan bid at the same time?"
At 0935 BST, the shares were down 0.3% to 406.80p.