Investors’ Interest Piqued By A Possible Vantiv IPO

Investors are listening closely to reports of a possible initial public offering of stock later this year by Vantiv LLC, one of the nation’s largest card processors.

Vantiv, formerly known as Fifth Third Processing Solutions LLC, declined to comment on reports of the company’s IPO plans. But a July 12 Wall Street Journal article quoting unnamed bankers who have discussed an offering with Vantiv has analysts reacting.

If the IPO occurs, it would prompt a strong response in the investment community because investors like the acquiring and issuing industry’s recurring revenue and relative stability in the face of economic cycles, David Koning, a senior analyst with Milwaukee-based Robert W. Baird & Co., tells PaymentsSource.

Besides, payments continue to shift from cash and checks to cards, thus compelling investors to look for card-related stocks, Konig observes.

“We get a lot of questions from investors interested in payments,” he says.

Despite that attraction to the processing business, investors often try in vain to buy a piece of the industry because opportunities are lacking, Konig says. “Part of the interest in these assets is the scarcity factor,” he says.

Only three major processors are publicly traded, Konig notes, citing Global Payments Inc., Heartland Payments Systems Inc. and Total Systems Services Inc., or TSYS. Other large processing platforms are privately held, including Vantiv, First Data Corp. and WorldPay US Inc., or are controlled by banks, such as JPMorgan Chase & Co.’s Chase Paymentech Solutions and U.S. Bancorp’s Elavon Inc. merchant-acquiring subsidiary, he says.

Some might also see an advantage in Vantiv’s ability to process for both acquirers and issuers. Most processors tend to stay on one side, dealing either with banks for issuer processing or with merchants and independent sales organizations on the acquiring side, Konig says.

Reports placing Vantiv’s value at $4.5 billion appear accurate, David Konrad, a New York-based analyst at Keefe, Bruyette & Woods, says in an equity research report.

Vantiv hopes to make about $1 billion in the IPO and would retain the rest of the company’s value, reports say. That approach could follow a usual procedure of selling off a company gradually, Konig says.

Vantiv changed its name from Fifth Third Processing in June (see story).  Fifth Third Bancorp owned all of the company until selling 51% to Advent International in March 2009 and keeping the remainder (see story).

Vantiv acquired National Processing Co. in September 2010 to increase it presence among smaller merchants (see story).  That same month it also acquired Springbok Services Inc. (see story).  And less than a year later, Vantiv bought Town North Bank’s TNB Card Services (see story).

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