MasterCard pays £333m for British online payments firm DataCash
Friday 20 August 2010
Mastercard has agreed to pay £333m for DataCash, a British payment services provider, to compete in the burgeoning market for online payments.
The world's second-biggest payments network said it had scoured the world for a business to boost its position in the fast-growing e-commerce business.
MasterCard said Aim-listed DataCash had the right products, geographic reach and management team to secure more business from vendors using its systems.
The US giant will pay 360p a share in cash – a 53 per cent premium on DataCash's closing price before the deal was announced.
DataCash shares soared 52 per cent to 355.25p.
The deal follows Visa's $2bn (£1.3bn) purchase last month of CyberSource in the US, which also provides security measures for online merchants. The payments giants are responding to increased competition from businesses such as eBay's PayPal as more business is done online.
Mastercard's chief executive, Ajay Banga, said buying DataCash was not a response to Visa's move and that it was an expansion in a market that was still in its early stages.
"It's the opportunity we see in the e-commerce space for the next decade. The story of e-commerce is only being written now," he said.
DataCash was founded in 1996. It sells a single software system that allows companies to process secure payments online and offline anywhere in the world.
MasterCard said DataCash's top-notch anti-fraud measures – developed for the online gaming industry – would be a big plus for its existing online payments business in Asia.
DataCash also gives MasterCard access to customers in European markets where online commerce has barely got going, and could be part of its push to take on Visa in the US, MasterCard products president Gary Flood said.
MasterCard's finance director, Martina Hund-Mejean, defended the hefty premium paid for DataCash by saying that the price was not out of line with similar deals and took into account the potential benefits DataCash would bring MasterCard.
DataCash is based in London, employs 362 people, and processed more than 240 million transactions for over 1,400 merchants in 2009.
MasterCard said DataCash's chairman, Ashley Head, and his team would stay on to build the business.
Mr Head said the acquisition would be a big opportunity for DataCash to expand internationally. The deal will also make him a multimillionaire in exchange for his stake in the company.
Deal reaps £173m for founders
DataCash's founders will make about £173m from the MasterCard deal. Its chairman Ashley Head is due £143m for his 43 per cent stake and former business development director Gavin Breeze will get about £30m for his 8.9 per cent.
The deal that made it all possible was DataCash's takeover in 2006 of Proc Cyber, which Mr Head launched and owned. DataCash paid Mr Head in shares, giving him half the company.
The deal combined Proc Cyber's anti-fraud technology – sold mainly to the online gaming sector – with DataCash's customer base and the company grew quickly.
Mr Head, 59, was born in Fulham, west London, "before it was posh" and worked for Chase Manhattan for 20 years, as well as in the Middle East and for MasterCard.
The deal is "a very special dream", he said yesterday, adding: "It's been interesting meeting some of the MasterCard guys again and comparing how much hair we haven't got."
Mr Breeze left the board in March 2008 because the Government cut the number of days he could work in the UK while enjoying the tax benefits of living in Jersey, but he remained a consultant.
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