Investing.com -- Shares of Worldline SA (EPA:WLN) fell over 7% on Tuesday after Bain Capital said that it is not involved in any takeover deliberations regarding the French payment processor.
A spokesperson for Bain Capital clarified that the private equity firm is "not looking at Worldline” as reported by Bloomberg News, putting an end to earlier speculation that Bain was exploring a potential bid for the company.
This comes after Reuters reported that Worldline has garnered early-stage interest from Bain Capital, as reported by Reuters.
Bain Capital, which already holds a stake in Nexi (BIT:BIT:NEXII), a competitor in the financial technology space, had reportedly consulted advisors to explore potential bid structures.
However, with Bain's denial of involvement, the focus on Worldline's future direction remains uncertain. The development underscores the complexities of private equity interest in the payments sector, with regulatory and governance hurdles further complicating any potential deal.
Despite the setback, the earlier speculation lent some credibility to discussions around Worldline, given Bain’s historical expertise in financial technology investments.
However, potential bids could still be challenged by the company's historically low valuation levels, concerns over overlapping stakes, and the resistance of local shareholders.
The French state investment bank Bpifrance and Crédit Agricole are among Worldline's investors and could push for a "French solution" to ensure domestic control of the company. This aligns with previous concerns about safeguarding strategic assets from foreign takeovers.
Worldline's financial performance remains a key point of focus, as recent estimates show modest revenue growth, from €4,610 million in 2023 to a projected €5,322 million by 2028. Profit margins have come under pressure, with EBIT margins declining from 19.8% in 2022 to 17.1% in 2023.
UBS analysts foresee a gradual recovery, with EBIT margins expected to rise to 18.1% by 2028, but challenges remain in maintaining operating leverage amid growing competition.
Private equity interest in Worldline, despite Bain's dismissal, reflects the recognition of a potential valuation floor in the company’s stock.
This mirrors a broader industry trend of increased buyout activity in the payments sector. Bain's past successful investments in companies such as Nets and Concardis, and its role in the formation of Nexi, illustrate its ability to restructure and consolidate players in the financial technology space.
However, UBS analysts caution that investor optimism should be tempered due to high execution risks and the company's constrained valuation metrics. Worldline is projected to have a price-to-earnings ratio of 4.1 by 2028, signaling ongoing pressure on its valuation.