August 05, 2010
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News: RBS Expected To Announce Sale Of GMS
It is rumored that the Royal Bank of Scotland (RBS) will soon make the final decision as to whether or not the bank will sell its leading credit card payment transaction processing company. In an unconfirmed communication, a source said that the bank hopes to sell its UK based Global Merchant Services (GMS) to Advent International and Bain Capital. It is expected that RSB will make the announcement when it releases its second quarter results provided both sides were able to reach an agreement during the night hours. It has also been reported that RBS, which is 70 percent owned by the UK Government, is asking to keep a fifth of the payment processing business.
Negotiations involve reaching terms on the amount of up-front money that will be paid to RSB for the credit card payment processing company as well as the amount and dates of future payments. Also involved in the negotiations is financing of the sale which is expected to be provided in joint by Barclays, UBS, Goldman Sachs, Morgan Stanley, and RBS itself. Advent and Bain will be tossing in several hundred million pounds to upgrade GMS's IT system which is considered old and not capable of performing to the company's best capabilities. Although the sale involving the two buyers is complex, RBS expects a smooth transition because Advent has previous experience in such deals when it purchased 51 percent of the card-processing division of the Fifth Third Bank.
The deal is said to be one of the biggest private equity deal in the UK during the past three years. It is expected that RBS will make a significant profit with the sale despite the fact that the final sale price is expected to be lower than the asking price several months ago. GMS is a major provider of the service which processes over 500 debit and credit card payment transactions per second. No change in management is expected to occur. The sale is part of the compliance terms of the European Commission's new rules which were implemented last year.