Expert Corporate Governance Service (ECGS)
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Etude de l'AG du 08/01/2018

Item 1: To approve a Scheme of Arrangement enabling the merger with Vantiv
The Board seeks shareholder approval for the merger with Vantiv Inc (Vantiv) by means of scheme of arrangement. Vantiv will acquire the entire share capital of the Company and Company shares will be de-listed.  The new company will be listed on the New York Stock Exchange.
The Company is engaged in processing money transactions.  Vantiv is a leading payment processor differentiated by an integrated technology platform, breadth of distribution and superior cost structure.  The Company’s Board considers the benefits of the merger to be the creation of a truly global payments provider; significantly increased scale to continue to invest in innovation and a larger platform to further participate in M&A; and synergies. Furthermore, they consider Vantiv’s business to be complementary to their own business in that it will facilitate their expansion in the US and enable the transfer of Vantiv’s technical knowledge to their merchants globally. Worldpay currently derives only 16% of its EBITDA in the US where the adoption of its technology has been slow given its late introduction of chip readers. Vantiv, which is purely a US player will now be able to provide its big-box US retailer customers with international eCommerce opportunities.
The merger will be implemented by way of a scheme of arrangement.  Under the proposed scheme of arrangement, Company shares are valued at 420 pence (based on a Vanitv share price of $72.4 and a $1.3333/£ exchange rate on 24 November 2017, the last practicable date), excluding dividends.   Each Company shareholder will automatically receive the standard consideration (55 pence and 0.0672 new Vantiv shares) in exchange for each of the Company’s shares held.  Shareholders are offered a “Mix and Match” facility, which allows them to choose to either receive the entire consideration in Vantiv shares or to receive the entire consideration in cash. 
At present, there is sufficient independence on the Company’s Board.  However, the composition of the Board will change following the merger and the changes are not fully disclosed.
There are concerns over the structure of the new Board and the  ‘performance testing’ applied to the 2016 and 2017 long-term incentive plans. The fact that the combined entity will effectively have two CEOs is also a cause for concern since it is not clear at this juncture who will actually be in charge.  We are also concerned by the fact that at least 32% of cost synergies will come from reducing the combined workforce by 12%. Nevertheless, Vantiv has presented a compelling strategic rationale for the merger, namely to create a global payment processor for e-Commerce transactions and the take-out multiple of 19.4 times EBITDA is above that of peers and recent transactions.   



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