SoftBank to buy 5.6% of Wirecard for $1.4b

Deal puts German firm, which was hit by talk of inflated revenue in Asia, on expansion path

BERLIN • Japan's SoftBank Group will buy a 5.6 per cent stake in Wirecard for around €900 million (S$1.37 billion), the German company said yesterday, joining forces in the digital payments sector.

Shares in Wirecard jumped 10 per cent to the top of Germany's blue-chip index as analysts welcomed the investment as a vote of confidence in the business that will allow the Munich-based firm to enlarge its operations in Asia.

Under the agreement, Wirecard will issue bonds exclusively to an affiliate of SoftBank that will convert into 6.92 million Wirecard shares after five years, currently equivalent to around 5.6 per cent of the company.

The conversion price of €130 per share represents a 5 per cent premium to Wirecard's closing share price on Tuesday. Shareholders will vote on the bond issuance at its annual meeting on June 18.

Wirecard, founded in 1999, ousted lender Commerzbank from Germany's blue-chip DAX index last year as it benefited from an accelerating global trend towards digital payments driven by e-commerce.

But the shares have shed around 38 per cent since early September, hurt by negative sentiment around tech stocks and reports in the Financial Times saying that staff at its Asian operations had inflated reported revenue.

Last month, Wirecard said an outside law firm investigating the matter found that local staff at its Singapore office may have committed crimes but these were not material to the German payment company's financial position.

Wirecard and SoftBank said they had also signed a strategic partnership to collaborate in the area of digital payments.

As part of this, Softbank will help Wirecard expand into Japan and South Korea, and provide opportunities to collaborate with other companies in its portfolio in areas such as data analytics/artificial intelligence and innovative digital financial services.

"Through this potential partnership, we will expand our reach and products to the East Asian markets, thereby further strengthening our position in Asia," Wirecard chief executive Markus Braun said.

Analysts at Baader Helvea said the investment was a "clear positive" that will allow Wirecard to leverage its product portfolio in Japan and South Korea, potentially even accelerating strong organic growth momentum.

Credit Suisse acted as financial advisers to SoftBank, and Sullivan & Cromwell as legal adviser. Noerr and Gibson, Dunn & Crutcher are serving as legal advisers to Wirecard.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 25, 2019, with the headline 'SoftBank to buy 5.6% of Wirecard for $1.4b'. Print Edition | Subscribe