UK Regulator May Accept Mastercard, VocaLink Moves to Allay Merger Fears

By Ian Walker

LONDON--Mastercard Inc. (MA) and VocaLink Ltd. have proposed measures that could address anti-competition concerns over their takeover deal, the U.K. Competition and Markets Authority said Wednesday.

Mastercard and VocaLink have offered to make VocaLink's connectivity infrastructure available to a new supplier of LINK payment services and to transfer or license the LINK messaging system. They have also offered to contribute to LINK members' switching costs.

The regulator has until March 15 to decide whether to accept these undertakings, or refer the deal for an in-depth investigation.

Last July, Mastercard said it was buying 92.4% of VocaLink in a deal valued at around $920 million.

The CMA raised concerns about the proposal, focusing on a possible reduction in the LINK scheme's ability to obtain value when tendering for an infrastructure provider, because VocaLink and Mastercard are two of the three major providers.

If the deal is completed, a majority of VocaLink's owners will retain a 7.6% stake for at least three years.

Mastercard U.K. Holdco Ltd., a unit of Mastercard, already owns and operates credit- and debit-card schemes Mastercard, Maestro and Cirrus and has bid to supply infrastructure services to U.K. interbank-payment systems.

VocaLink's technology provides the backbone for non-card transactions such as employer-payroll deposits and consumer-bill payments, processing over 90% of salaries, more than 70% of household bills and almost all state benefits in the U.K. It also unites the infrastructure of Britain's automated-teller-machine network among participating banks via the LINK network.

VocaLink reported $240 million in revenue in 2016 and processed more than 11 billion transactions.

VocaLink is owned by a consortium of 18 banks and building societies, with the four biggest being Royal Bank of Scotland Group PLC, Barclays PLC, HSBC Holdings PLC and Lloyds Banking Group PLC.

After the deal was announced, the U.K. Payment Systems Regulator said the four largest shareholders of VocaLink should sell all or part of their holdings if its acquisition by Mastercard didn't go ahead, to boost competition.

RBS confirmed it would sell its 21.4% shareholding in VocaLink and book a 150 million pounds ($183 million) pretax gain in its accounts. Barclays said it had sold 13.68% of its shareholding for GBP104 million, leaving it with a 1.5% stake.

-Write to Ian Walker at [e-mail]

(END) Dow Jones Newswires

January 18, 2017 06:20 ET (11:20 GMT)

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