Barclays Struggles with Merchant Payments Unit Sale
Barclays is facing significant hurdles in its attempt to divest a stake in its UK merchant payments unit. The bank’s ambitious valuation of the business has deterred potential buyers, casting uncertainty over the sale.
Challenges in the Sale Process
Recent months have seen a number of private equity firms, including Brookfield, withdraw from the bidding process. These firms have cited Barclays’ high asking price as a primary concern. The situation has been further complicated by Barclays’ acquisition of Take payments, a key payments partner. This move has led to a dip in revenues, adding another layer of complexity to the sale negotiations.
Despite these challenges, Barclays remains determined to find a buyer. A spokesperson from the bank confirmed their commitment to exploring various options for investment in their leading merchant acquiring business, including potential strategic partnerships.
Valuation Rollercoaster
Barclays initially aimed to value the merchant payments unit at over £2 billion ($2.5 billion). However, as the sale process progressed and documents were circulated to potential bidders, the valuation had to be adjusted to just above £1 billion ($1.3 billion). Furthermore, last December, Barclays announced a £300 million ($392 million) reduction in the unit’s valuation. This downward adjustment reflects the broader struggles within the European payments sector, which has seen a decline in revenues over the past three years, affecting major players like Nexi, Adyen, and Worldline.
Strategic Rationale Behind the Sale
The decision to sell a stake in the merchant payments unit aligns with Barclays CEO C.S. Venkata krishnan’s broader strategy to enhance the bank’s returns. This move is part of a larger effort to streamline operations and refocus on core business areas.
In line with this strategy, Barclays has recently announced several significant divestitures. This July, the bank revealed plans to sell its German consumer finance business. Earlier in April, Barclays completed the sale of its Italian mortgage portfolio. Additionally, the bank sold $1.1 billion in credit card receivables to Blackstone’s Credit & Insurance segment. These moves aim to strengthen Barclays Bank Delaware’s lending capacity in the U.S.
Stock Performance
Despite the challenges in offloading the merchant payments unit, Barclays’ stock has seen impressive growth. Year to date, shares have surged by 49%, significantly outperforming the industry’s 9.4% growth. This strong performance underscores investor confidence in Barclays’ broader strategic direction, even as the bank navigates the complexities of its divestiture efforts.