Vantiv Buys Mercury Payment Systems for $1.7B

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.

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