Nexi Announces Merger With Nordic Rival Nets; We See Long-Term Strategic Value

After entering exclusive talks over a week ago, Nexi and Nets came to an agreement to merge forces. The deal follows a similar structure to the SIA deal announced just six weeks ago. In an all-share transaction, which values Nets at roughly 20 times 2020 estimated EBITDA, Nexi will gobble up new European regions with a heavy tilt toward merchant acquiring markets primarily in the Nordics and Austria, Germany, and Switzerland. The deal makes long-term strategic sense. Not only does it solidify Nexi’s position as one of the largest European payment services providers, it also poses as an answer to Worldline’s acquisition of Ingenico this year. The European merchant acquiring and card issuing markets are country-specific, but in the the long term we expect an increasing push toward a more homogeneous payment segment. The Nets merger is targeted to close in the second quarter 2021, pending regulatory approval. We maintain our fair value estimate of EUR 13.60 per share as we assess the long-term implications of this deal. Our narrow moat and stable trend ratings are unchanged.