UK banks eye profits from MasterCard's VocaLink takeover
VocaLink operates the UK's Bacs payment system and Link cash machine network
Consortium of 18 banks owns VocaLink, also including Barclays, HSBC, Lloyds and Santander
Updated : 14:43
Lloyds Banking and Royal Bank of Scotland could each make at least a £150m profit from MasterCard's proposed £869m acquisition of VocaLink Holdings (VLH), which is majority owned by a consortium of 18 high street banks that also includes Barclays and HSBC.
MasterCard said on Thursday afternoon that it had agreed the purchase of 92.4% of UK-based VocaLink, which operates payment technology platforms, including the BACS automated clearing house and the LINK cash machine network
RBS, which is a 21.4% shareholder in VHL, confirmed its share of the sale proceeds will comprise cash on completion and contingent earn-out consideration which is potentially payable in 2019, subject to performance.
According to the latest available figures, Lloyds also owned a 25.1% stake, HSBC 15.91% and Barclays 15.18%.
Taxpayer-owned RBS expects to report an initial pre-tax gain of approximately £150m on completion of the acquisition.
Other VocaLink shareholders will retain a 7.6% stake in the firm for at least three years, MasterCard said, with other shareholders including RBS, earning up to an additional $220m if certain performance targets are met.
Co-Op Bank said its 3.3% stake in the company would comprise a mix of roughly £25.1m cash and a possible earn-out consideration of up to £3.2m.
"We're excited about the opportunity to play a bigger role in payments in the UK, a very strategic market for us," said MasterCard chief Ajay Banga.
Earlier this year the UK Payment Systems Regulator (PSR), in its initial conclusions on its review of the country's payments infrastructure, proposed the banks sell their stake in VocaLink "in order to open the market and allow more effective competition and innovation".
VocaLink processes more than 90% of salary payments in the UK, more than 70% of all household bill payments and almost all state benefits, all totalling more than 11bn transactions per year with a value of £6trn.
On Thursday the PSR said: "It will be for the relevant merger authority to consider the effects of this merger under merger control law.... we will discuss developments with MasterCard and VocaLink and - where appropriate - with the relevant merger authority. Our main consideration is that the infrastructure delivers good outcomes for the people and businesses that use it."