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Visa vs Mastercard: Survival of the richest for Earthport in the Blockchain market

Blockchain market

 

The past four months have borne the brunt of an ongoing clash between the two American card payment giants, Visa and Mastercard, to claim acquisition over Earthport. Both these companies have been one-upping each other with their bidding for this procurement.

 

Earthport?

Earthport is a cross-border payment service provider that was established in 1997 and they offer a lower-cost alternative to traditional payment systems. They do so by streamlining the movement of money across borders using a single API to clear and settle funds locally with its banking partners. Their global payments network includes banks in more than 87 countries, with clients like Bank of America, Hyperwallet, Transferwise, and Payoneer.

 

Subject of our curiosity?

Cryptocurrency enthusiasts are not overly involved in the business operations of these large legacy payment giants. However, Visa and Mastercard's acquisition plans of Earthport strikes the interest of crypto enthusiasts and Ripple fans alike as Earthport is a partner of Ripple Labs.

In 2016, Earthport decided to take advantage of the benefits of Distributed Ledger Technologies (DLT), by launching a business API that connects banks with Ripple’s DLT protocol.

Ripple Labs provides a network platform that enables real-time payments across borders in different currencies, including Bitcoin and fiat.

What Ripple Labs brings to the table that Earthport can't, is handle real-time transactions. Cryptocurrency rails are real-time or near-real-time.

 

Why is Earthport so important to Visa and Mastercard?

The most obvious and pervading use-case of Crypto remains a payment solution. The fight to become the top dog in the financial services domain has piqued interest for both traditional giants Visa & Mastercard. Earthport with its existing user-base & low cost payment solution offers easy traction to the acquirer and sets the competitor on the back-foot having to deal with not just the due-diligence of finding a new acquisition, but also the ignominy of the ‘defeat’ in the pricing war.

Related Reading: Coinbase in advanced talks to acquire Xapo



What went down?

This whole ordeal began in December 2018 when Visa’s acquisition of Earthport was said to take place for a consideration of a whopping $226 million and was touted to be one of the largest in the financial services industry.

 

In the stock deal, Visa offered 30 pence for each Earthport share and Earthport said the offer from Visa was “fair and reasonable” and that it will recommend shareholders vote in favor of the deal.

 

Shortly after, Mastercard opened up a turf war with Visa by declaring a bid at a 10% premium to Visa's valuation which is ~$305 million, moving Earthport to withdraw its recommendation of the Visa Offer.

 

Sunil Sabharwal, interim chairman of Earthport, commented: "The Board of Earthport is pleased to recommend Bidco's cash offer for Earthport which is at a 10%. premium to the Visa proposal. This offer provides our shareholders with even greater value in cash for their shares."

 

What felt like a financial war was almost over. It looked like Mastercard had the higher stakes and that they’d emerge victorious. Not before Visa gatecrashed the tribulation by making an offer of 37 pence per share, i.e, ~$320 million. This offer is 12% higher than the price agreed with Mastercard previously and 23% more than the original deal it offered Earthport late 2018.

 

Visa, of course, wanted to have a bigger stake upon an ever more global stage. Visa’s cross-border payments volume has been growing by double digits, at 10%, as seen in its most recent quarterly results.

Now, we wait for the official press release from either Visa, Mastercard or Earthport.

 

Earthport, the clear winner!

Shares in Earthport jumped almost 9% to 42 pence after this news. The stock has since been trading higher than Mastercard’s offer price since its bid was announced, suggesting that many shareholders were expecting a counter-offer.

Desperate not to be left out of this deal, Mastercard then issued an announcement to Earthport's shareholders urging them not to accept the new bid.

It is important to consider that Earthport is a stand-alone public company. A couple of months ago, it was about $7 a share. It has since risen to $37.

 

The final acquirer of this capital packed-bidding can expect themselves to be a key player in the peer-to-peer payments industry. This gives them an entry into the blockchain platform as the first card payments company to enter the crypto-space.

 

Read more about the other developments in February in our Monthly Report: February 2019 edition.

You can also specifically read about the private funding activities in our Monthly Private Funding Report: February 2019 edition.



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