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JPMorgan in Balancing Act as Worldpay Broker and Suitor

Updated on
  • The bank won a role as corporate broker to Worldpay this year
  • JPMorgan said it would not pursue a bid for the company

JPMorgan Chase & Co.’s interest in acquiring Worldpay Group Plc placed the investment bank in the unusual position of being both its client’s broker and potential buyer before it decided to walk away.

Corporate brokers, rarely seen outside of the U.K., advise clients and support their investor relationships for minimal fees in the expectation of winning more lucrative mandates on bigger deals, such as mergers or equity sales. Firms typically call their brokers to weigh in or provide defense when they receive a takeover approach.

JPMorgan -- the top corporate broker in the U.K., in part because of its acquisition of British partner Cazenove Group in 2009 -- won the coveted Worldpay broking mandate in February, people familiar with the matter said at the time. Investment banks in these roles may have access to confidential information, though they are careful to keep the brokerage business separate from other parts of the operations. JPMorgan isn’t advising Worldpay on the takeover approaches and has suspended analyst research on the company. The firm also won’t provide broking services during this transaction, people familiar with the matter said.

Worldpay said Wednesday it had reached a takeover agreement with U.S. payment processing company Vantiv Inc., its other suitor, for 7.7 billion pounds ($9.9 billion). JPMorgan followed with its own statement, saying it had considered an offer for Worldpay after an invitation from the company, but decided not to proceed.

“Once you become a substantial market force you are inevitably going to have conflicts,” said Peter Hahn, the Henry Grunfeld professor of banking at the London Institute of Banking and Finance. “It’s an unusual situation, but has the highest probability of happening with JPMorgan because of its large client base of broking clients.”

Paying the World for Worldpay? That May Be a Tough Sell: Gadfly

Worldpay Deal

Shares of Worldpay, whose technology is used by small businesses to process payments, had closed nearly 28 percent higher Tuesday after it said it had received preliminary takeover approaches from JPMorgan and Vantiv in response to media speculation. They were trading 9.7 percent lower at 368.40 pence at 2:24 p.m. in London Wednesday.

Vantiv’s offer is about 21 percent above Worldpay’s closing share price on June 30, before bid speculation surfaced, excluding the dividend, the companies said in a statement. Worldpay investors will receive 55 pence per share in cash and 0.0672 new Vantiv shares. After the deal, Worldpay shareholders will own about 41 percent of the combined companies.

Goldman Sachs Group Inc., which has said it’s advising Worldpay, and Morgan Stanley have suspended analyst coverage on Worldpay, something firms typically do when involved in a merger situation with a company. Goldman Sachs worked on Worldpay’s 2015 initial public offering and also acts as a broker for the U.K. company.

JPMorgan acted as a broker to 193 companies as of May, more than any other bank, according to data compiled by Adviser Ratings Ltd. Its other clients include Aberdeen Asset Management Plc, miner Lonmin Plc and Barclays Plc, according to ARL.

As banking becomes more competitive, firms are “increasingly likely to expand into fintech, so mergers with companies who might previously have been their clients might be underway,” said Anastasia Nesvetailova, director of political economy at City University in London. “However, the increased complexity of modern structure makes identifying conflicts of interest very difficult.”

(Updates with Worldpay agreeing to deal with Vantiv, JPMorgan dropping out in fourth paragraph.)
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