In a bid to expand in the e-commerce arena and maximize on all the action online, major credit card company MasterCard Incorporated (NYSE: MA) has agreed to acquire UK-listed DataCash Group plc (LON:DATA), a European payment service provider, at a price of 360 pence per share in cash, valuing the company at approximately GBP 333 million (US$520 million). DataCash was up a whopping 51.7% in early afternoon trading in the UK today to 355 pence, making it the largest riser in London`s Alternative Investment Market.
DataCash offers a single interface that provides e-commerce merchants with the ability to process secure payments. The company develops and provides outsourced electronic payments solutions, fraud prevention, alternative payment options, back-office reconciliation and solutions for merchants selling via multiple channels. Last year, it reported revenue of GBP 36.9 million (US$58 million) and an EBITDA margin of 46%.
As the online purchasing phenomenon amplifies, more and more companies are looking to get a slice of the action. The acquisition is expected to help MasterCard grow its e-commerce category in Europe, thus increasing the use of MasterCard-branded credit and prepaid products, as well as MasterCard and Maestro-branded debit products for online purchases, said MasterCard.
"The acquisition of DataCash will expand our already significant e-commerce merchant gateway presence in Asia and Australia to European countries and other high-growth, emerging markets worldwide," said MasterCard president and CEO Ajay Banga.
The plan is to expand DataCash's platform and launch MasterCard's new generation of e-commerce, mobile commerce and other payment products, allowing merchants to quickly transition into these new forms of payments with minimal challenges. The merger will also enable DataCash to grow its business abroad, in places other than Western Europe, it said.
Commenting on the transaction, chairman of DataCash, Ashley Head, affirmed: "The proposed acquisition represents a significant opportunity for DataCash to drive increased adoption of our platforms and programs internationally and become part of the exciting value proposition of MasterCard."
MasterCard expects the transaction to be approximately $0.05 dilutive to its fourth quarter 2010 earnings per share due to amortization and one-time transaction costs. For 2011, the company anticipates the acquisition to be break even with respect to earnings per share, and become accretive in 2012.
The deal is to close by the end of October this year and is subject to a number of closing conditions, including DataCash shareholder approval.
In 2009, DataCash processed more than 240 million transactions for more than 1,400 merchants in a variety of sectors, including retail, travel and leisure, entertainment, gaming and telecommunications. It employs 362 people worldwide with operations in London, Dublin, Mannheim and Cape Town.