Warburg Pincus buys $625 million Metavante

Warburg Pincus has become the second private equity firm this week to back a US-based electronic payments firm, following KKR’s $29 billion acquisition of First Data on Monday.

Warburg Pincus has invested $625 million (€468 million) in Metavante, an electronic payments division which is being spun out of US bank Marshall & Ilsley.

Warburg Pincus will acquire a 25 percent stake in the company, while Marshall & Ilsley will retain a 75 percent stake. The transaction values Metavante at $4.25 billion, which includes $1.75 billion in debt arranged by JP Morgan Securities and Morgan Stanley.

It is the second such firm this week to receive private equity backing. On Monday Kohlberg Kravis Roberts agreed a $29 billion deal for First Data, another electronic payments company – one of the biggest ever private equity deals.

Metavante, which has approximately 5,500 employees, provides electronic payment services for 8600 firms worldwide. The division, which generated revenues of $1.5 billion last year, has trebled in size in the last seven years thanks to 17 strategic acquisitions.

The division accounted for about 20 percent of Marshall & Ilsley’s total 2006 net income of $820 million. Including Metavante, the bank had total assets of approximately $56.2 billion at the end of the year.

Marshall & Ilsley president Mark Furlong said the buyout firm’s investment would help the division to expand into new geographic markets, continue its organic growth and pursue strategic initiatives with other part of the bank.

Warburg Pincus has raised 12 private equity investment funds and it has around $20 billion of assets under management. It has invested in numerous media, telecommunications and financial services companies including easycash, Mellon Financial and Yodlee. 

The deal was led by Jim Neary, the co-head of Warburg Pincus’ technology, media and telecommunications group, and by David Coulter, the firm’s head of financial services.

Warburg Pincus’ TMT group has recent enjoyed two stellar exits – the sale of Institutional Shareholder Services, a proxy voting service provider, in a $550 million deal that netted Warburg Pincus a 12-times return, and the pending sale of product lifecycle management software provider UGS to Siemens, which will mean a three-times return to Warburg Pincus and co-investors Silver Lake Partners and Bain Capital. UGS was formerly a division of Texas-based EDS.