French payments firm Worldline draws Bain's attention

Investing.com -- Worldline SA (EPA:WLN ), a French payment processor with a pan-European presence, has garnered early-stage interest from Bain Capital, as reported by Reuters. 

This development shows renewed private equity attention toward the company, following prior speculative interest from unnamed parties in late 2023. 

Bain, already a stakeholder in Nexi—a comparable entity within the financial technology space—has reportedly consulted advisors to explore potential bid structures. 

While no formal proposal has emerged, the involvement of Bain Capital lends credibility to these developments, given its historical expertise in financial technology investments.

However, the pathway to a deal remains uncertain. Shareholders may resist any bid anchored around the company's historically low valuation levels, and Bain's existing relationship with Nexi (BIT:NEXII ) could present regulatory or governance hurdles. 

A bid may also face scrutiny due to potential conflicts in managing overlapping stakes in similar entities.

Further complicating matters is the composition of Worldline's investor base. Local shareholders, including the French state investment bank Bpifrance and Crédit Agricole, may advocate for a "French solution" to preserve domestic influence over the company. 

This sentiment aligns with prior speculation around state-backed solutions to safeguard strategic assets from foreign takeovers.

Worldline's financial performance has been under scrutiny, with estimates pointing to modest revenue growth, increasing from €4,610 million in 2023 to a projected €5,322 million by 2028. 

Profit margins, however, have narrowed recently, with EBIT margins declining from 19.8% in 2022 to 17.1% in 2023. 

These trends underscore challenges in maintaining operating leverage and navigating competitive pressures. 

UBS analysts project a gradual recovery in profitability, with EBIT margins anticipated to return to 18.1% by 2028.

Private equity interest reflects the recognition of a potential valuation floor in Worldline's stock, signaling a broader industry trend of increased buyout activity within the payments sector. 

Bain's past investments—ranging from Nets to Concardis, and later the formation of Nexi—demonstrate its capacity to restructure and consolidate entities in this space. 

Analysts at UBS caution, however, that investor optimism should be tempered by the high execution risks and the company's constrained valuation metrics, such as an estimated price-to-earnings ratio of 4.1 by 2028.

Source: Investing.com