By Elisa Anzolin
MILAN (Reuters) - Italy's biggest payments firm Nexi (MI:NEXII) on Monday announced a long-awaited merger with rival SIA to create a group with 1.8 billion euros ($2 billion) in annual revenue that looks to expand further in Europe.
Nexi and SIA have been in merger talks for more than a year-and-a-half to create a payments firm whose domestic market share Jefferies has estimated at around 70%. Differences over valuation and governance had held back a deal.
SIA is indirectly controlled by the Italian state through Cassa Depositi e Prestiti (CDP), which will own around a quarter of the new group.
"This transaction will create a large Italian paytech company ... with scale and capabilities to play an increasingly leading role in ... a market, like the European one, that sees strong consolidation trends," Nexi boss Paolo Bertoluzzo, who will head the new group, said in a statement.
The payments sector has seen a wave of mergers and acquisitions.
This year France's Worldline (PA:WLN) agreed to buy peer Ingenico in a 7.8 billion euro deal that will create the fourth-biggest payments company in the world.
Italy's digital payments market, which lags that of other European countries, is expected to expand rapidly with the COVID-19 crisis acting as a catalyst.
The all-share deal gives SIA an equity value of 4.6 billion euros and will hand Nexi about 70% of the merged company.
Nexi's private equity owners Advent, Bain Capital and Clessidra will have 23% of the new group.
With a market value of more than 15 billion euros, the new group will be a leader in continental Europe with around 120 million cards managed and handling payments for roughly 2 million merchants.
It will process more than 21 billion transactions a year, the companies said.
The merger, the second biggest private equity-backed deal of 2020, is expected to complete by the summer of 2021, subject to some conditions.
The new group will have a pro-forma adjusted core profit of 1 billion euros, with fully-phased recurring cash synergies estimated at around 150 million euros and one-off capex synergies at 65 million euros.
Nexi is focused on the Italian market, while SIA generates a third of its revenue abroad. SIA's biggest domestic client is UniCredit and a recent accord to renew their partnership removed a major hurdle for the deal with Nexi.
Nexi was advised by Bank of America (NYSE:BAC), Mediobanca and HSBC while JPMorgan (NYSE:JPM) and Rothschild represented Sia.
Intesa Sanpaolo (MI:ISP) and Nomura advised Nexi’s top investor Mercury UK Holding, which is the investment vehicle of Bain and Advent.