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) 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) was lead adviser to Vantiv, which also retained a Bank of America Merrill Lynch (BAC) 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). 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.
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