Payment Processor Vantiv Opens Up 11.7% Post-IPO
March 22 2012 - 10:45AM
Dow Jones News
Payment processor Vantiv Inc. (VNTV) made trading gains on its
first day as a public company Thursday after pricing within its
range.
The company's stock opened at $19 a share on the New York Stock
Exchange, up nearly 12% from its initial public offering price of
$17. It sold 29.4 million shares at the midpoint of its expected
$16 to $18 range.
Based in Ohio, Vantiv is a payment processor that allows
businesses to accept and process credit, debit and prepaid
payments. Vantiv also provides payment services to financial
institutions, such as card issuer processing, payment network
processing, fraud protection, card production, and prepaid program
management. According to the Nilson Report, it is the third largest
merchant acquirer and the largest PIN debit acquirer by transaction
volume in the U.S.
Vantiv says the businesses that use its processing services are
heavily weighted toward non-discretionary spending categories, such
as grocery and pharmacy, and includes large national retailers,
including nine of the top 25 national retailers by revenue in 2010.
It says its financial institution client base is also well
diversified and includes over 1,300 firms.
It is planning to increase its small- to mid-sized client base,
since smaller merchants and financial institutions tend to
outsource all or a majority of their payment processing. It is also
developing other payment processing services, including expanding
its prepaid card services and fraud management services.
Vantiv plans to expand its sales channels to increase sales to
existing and new clients, including adding to its direct sales
force. In the future, the company wants to expand internationally
through strategic partnerships or acquisitions. The company
recently completed three acquisitions, and will continue to seek
acquisitions of companies or merchant portfolios, it says in its
prospectus.
The company generates revenues based primarily on transaction
fees paid by merchants or financial institutions. Its revenue rose
40% to $1.6 billion in 2011, and net income increased 54% to $84.8
million.
Among the risks Vantiv faces is the highly competitive nature of
the payment processing business. Its rivals include financial
institutions and well-established payment processing companies. On
the merchant side, it competes against Bank of America Merchant
Services, Chase Paymentech Solutions, U.S. Bancorp's (USB) Elavon
Inc. subsidiary, and First Data Corp. On the financial institution
side, it competes with Fidelity National Information Services Inc.,
First Data Corp., Fiserv Inc. (FISV), Total System Services Inc.
(TSS) and Visa Debit Processing Service.
Vantiv is also facing new competition emerging from
non-traditional sources that offer alternative payment methods,
such as PayPal and Google Inc. (GOOG).
In order to provide its transaction processing services, Vantiv
is registered through its bank partnerships with Visa Inc. (V),
MasterCard Inc. (MA) and other payment networks as service
providers for member institutions, so it and many of its clients
are subject to card association and payment network rules that get
changed from time to time. In some cases, payment networks compete
with Vantiv, and Vantiv warns that they can modify and enhance
their rules in ways that may provide them with an advantage
Vantiv began life as a business unit of Fifth Third Bank (FITB).
In June 2009, Advent International Corp. acquired a majority
interest in the bank's payment processing business unit. Fifth
Third and Advent continue to own approximately 18.5% and 70% of the
company, respectively, post-IPO.
J.P. Morgan Chase & Co. (JPM), Morgan Stanley (MS), Credit
Suisse Group (CS), Goldman Sachs Group Inc. (GS) and Deutsche Bank
AG (DB, DBK.XE) were the book-running managers on Vantiv's
offering.
-By Lynn Cowan; 202-257-2740; lynn.cowan@dowjones.com
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