NEW YORK (The Deal) -- After readying portfolio company Mercury Payment Systems for an IPO, backer Silver Lake Partners will instead sell the payment processing software and services provider to Vantiv (VNTV - Get Report) for $1.65 billion.
During a Monday, May 12, call announcing the deal, Vantiv CEO Charles Drucker said that Mercury would complement recent purchases of payment processing companies such as Litle & Co. and Element Payment Services. Durango, Colorado-based Mercury processed nearly 1.2 billion transactions in 2013. The company generated $93 million in 2013 Ebitda, an increase of 23% from the prior year, on sales of $237 million.
Vantiv's payout comes to nearly 18 times 2013 Ebitda, though Drucker Monday said the price would be in the "mid-to-low teens" when factoring in savings and tax benefits from the deal.
Founders Jeff Katz and Marc Katz started Mercury in 2001 with investor Larry Stone. Silver Lake paid $450 million in 2010 for a majority stake. Silver Lake holds 62% of the equity, according to April filings with the Securities and Exchange Commission, while founders Jeff Katz and Marc Katz hold nearly 38%.Mercury registered for a $100 million IPO in March. "Mercury has been a fast growing company and we have known Mercury for a while," Drucker said Monday, when asked whether the Vantiv had previously looked at the company. Vantiv purchased Chandler, Ariz., payments processor Element Payment Services in 2013 for an undisclosed sum. A year earlier, Vantive purchased Litle & Co., of Lowell, Mass., for $361 million in cash. CFO Mark Heimbouch said Monday that Vantiv's first priority would be to invest in growth, which could include more M&A. Credit Suisse Group (CS - Get Report) was lead adviser to Vantiv, which also retained a Bank of America Merrill Lynch (BAC - Get Report) team including Matt Sharnoff, Anand Melvani and Kaivan Shakib. Wachtell, Lipton, Rosen & Katz lawyers Steven Rosenblum, MatthewGuest, Brandon Price, Jeannemarie O'Brien and Joshua Holmes provided counsel to the buyer. The lead adviser to Mercury was Morgan Stanley (MS - Get Report). Also advising the target were JP Morgan bankers Rick Diamond and Jay Hoffman; Barclays Capital and Steve McLaughlin of FT Partners. Bill Dougherty led a team from Simpson Thacher & Bartlett LLP advising Mercury. The parties expect to close the deal in the second quarter of 2014.