US-based First Data joins AIB in €100m bid for Payzone

US financial services group First Data has joined forces with AIB in its bid for Dublin-based payments company Payzone, which is worth more than €100 million, according to sources.

It is understood that the talks, which have been ongoing for months, may come to a conclusion in the coming weeks. AIB is scheduled to unveil full-year results to the market on March.

It would mark the first major deal carried out by AIB since the onset of the financial crisis in 2008, which led to the bank receiving a €20.8 billion taxpayer bailout. The negotiations follow on from the bank's abortive talks early last year to acquire the Irish unit of Investec, which was founded in South Africa and headquartered in London.

AIB has operated a debit and credit cards transactions joint venture called First Merchant Processing (Ireland) Limited (FMBI), trading as AIB Merchant Services, since 2007 with First Data. It is Ireland’s largest provider of card acceptance services across retail outlets, supermarkets and fuel forecourts.

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Joint venture

It is not clear if the bid for Payzone has been mounted under the existing FMBI joint venture, or a separate vehicle. First Data is the minority partner to AIB in the Payzone process, according to sources.

The Sunday Times first reported over the weekend that AIB was in talks to buy Payzone, which was put on the blocks last year by its current owner, Irish-American private equity firm Carlyle Cardinal Ireland (CCI). CCI, which is backed by the Ireland Strategic Investment Fund, acquired the business from another private equity fund, Duke Street, in 2015 for €39 million.

Spokesmen for AIB and CCI, which owns 90 per cent of Payzone, declined to comment, while a spokeswoman for First Data didn’t respond to a request for comment.

AIB, which is 71 per cent State owned, is obliged under its relationship framework agreement with the Government to consult with Minister for Finance Paschal Donohoe on any "material" takeover deals it is planning to undertake that are worth in excess of €100 million.

However, the fact that the planned cost of Payzone is being shared, and AIB's portion is set to be well below that threshold, means that the transaction is unlikely to need an official nod from the Minister. Still, it is believed that the bank has kept the Department of Finance abreast of the discussions for some time.

Payments network

Payzone, based in Sandyford in south Dublin, has the largest consumer payments network in the country with more than 7,000 retail agents. It processes mobile phone and travel card top-ups, debit and credit card transactions, motorway toll and local property tax payments, as well as pre-paid utility and parcel collection services.

"With AIB having close to €2.8 billion in surplus capital at the end of 2018 under our model, such an acquisition would make only a small dent in its available firepower and may be a sensible use of at least some of its surplus capital at a time when regulatory restrictions around repaying it to shareholders remain in place," said Owen Callan, an analyst with Investec.

AIB moved before Christmas to name its head of wholesale and institutional banking, Colin Hunt, as its next chief executive, subject to necessary regulatory approvals. He will replace Bernard Byrne, who is set to leave the bank in the coming months to become head of stockbroker Davy's capital markets division.