Advent and Bain purchase £2bn of RBS assets

Private equity firms Advent International and Bain Capital have acquired RBS’s card payment processing business for more than £2bn.

Boston-based private equity firms Advent International and Bain Capital have signed an agreement to acquire RBS WorldPay, the Royal Bank of Scotland’s card payment subsidiary business, for an enterprise value of up to £2.025 billion (€2.43 billion; $3.24 billion).

The transaction value includes a £200 million “contingent consideration”, which would be paid to RBS if the two buyers exit the business meeting certain benchmarks.

Government-owned RBS will retain a minority stake of 19.9 percent in WorldPay, with Advent and Bain evenly splitting the remainder, according to a source familiar to the deal.

Mezzanine finance to the tune of $470 million was provided by a consortium of lenders comprising Kohlberg Kravis Roberts’ KKR Asset Management, mezzanine specialist TCW/Crescent Mezzanine and Bain Capital affiliate Sankaty Advisors.

Advent will be deploying capital from its €6.6 billion Global Private Equity VI fund, while Bain Capital is investing from its $11.8 billion Fund X, and Bain Capital Europe III, the firm’s €3.5 billion Europe-focused fund, according to a spokesman.

The transaction is subject to regulatory approval and is expected to close before the end of 2010, according to a joint statement from Bain and Advent.

The sale of WorldPay, also known as Global Merchant Services, is expected to generate a book gain of between £800 million and £900 million, according to a report in the Financial Times. 

“Advent and Bain will be making a very significant investment in the company to enhance its technology and expand the range of products and services offered to merchants,” said Advent managing director, James Brocklebank, in a statement.

Payment processing: RBS
cashes out

RBS WorldPay is the largest provider of card payment services in Europe and processed a total of 6.8 billion transactions worldwide with a value of £243 billion.              

The Worldpay purchase marks the latest deal in a string of payment processing businesses for the two firms, including Advent’s 2009 purchase of a 51 percent interest in Fifth Third Processing Solutions, a electronic payments and credit card processing services company; and Bain’s 2005 investment of $75 million in FleetCor, a provider of specialized credit cards for commercial fleets and gas retailers.

The latest RBS disposal follows an agreement reached earlier this week with Spanish banking group Santander to buy 311 RBS-branded branches in England and Wales, and seven NatWest branches in Scotland. The branches initially attracted bids from UK charitable foundation The Wellcome Trust, and private equity firm the Blackstone Group, as reported in PEO.

The deals come amid European Union regulators forcing the bank to sell assets as a consequence of receiving £45.5 billion pounds in government bailout funds.

The two recent deals leave only RBS’s insurance business left to sell under European Union requirements.