(Bloomberg) — SoftBank Group Corp. has agreed to invest about 900 million euros ($1 billion) in convertible bonds of Wirecard AG that could give the Japanese conglomerate a minority stake in the beleaguered German internet payments firm.
The five-year securities will allow an affiliate of SoftBank to acquire a 5.6 percent holding in Wirecard at 130 euros a share, the German company said in a statement Wednesday. Wirecard and SoftBank also agreed on a strategic partnership for digital payments.
Wirecard shares jumped as much as 10.5 percent to 136.45 euros in Frankfurt trading. Its American depositary receipts had climbed on the news after Bloomberg News earlier reported the talks.
SoftBank’s investment and the strategic partnership is a “clear positive” for Wirecard, Knut Woller, an analyst with Baader Bank AG, said in a note. The deal will enable the company, based near Munich, to better sell its products in Japan and South Korea, which were still white spots in Wirecard’s regional footprint, he said.
A cash injection by SoftBank could help shore up investor confidence at Wirecard after a series of reports published by the Financial Times since January that alleged accounting wrongdoing at the company’s Singapore operations. Wirecard has seen its market capitalization — which topped Deutsche Bank AG earlier this year — cut by about a quarter to 15.3 billion euros.
Wirecard has repeatedly denied wrongdoing and said an internal investigation cleared it of material faults. It said on April 5 that an accounting executive who has been at the center of fraud allegations at the Singapore business has left the company. The German financial regulator BaFin had banned short trading for two months until lifting the restriction on Friday.
Asia Expansion
Wirecard’s American depositary receipts gained 6.8 percent to $71.79 at the close in New York. Each ADR is equal to half a regular company share.
“SoftBank Group will seek to support Wirecard’s geographic expansion into Japan and South Korea, as well as providing collaboration opportunities within SoftBank Group’s global portfolio in digital payments, data-analytics/AI and other innovative digital financial services,” Wirecard said in its statement.
The agreement with SoftBank followed weeks of discussions by the companies’ top management, people familiar with the matter said. SoftBank could buy more Wirecard shares on the market at a later stage, one of the people said.
A representative for Tokyo-based SoftBank declined to comment on Tuesday.
The investment would expand Wirecard’s reach in Asia, one of its key growth regions. The firm operates as one of several payment providers for ride-hailing service Uber Technologies Inc., in which SoftBank’s technology-focused Vision Fund owns a 15 percent stake. Closer ties with its new investor could help Wirecard win more business from Uber and other portfolio companies under the Vision Fund, one of the people said. It could also provide services to Alibaba Group Holding Ltd., in which SoftBank owns a stake.
Payment Shift
For SoftBank, the company being remade by founder Masayoshi Son from a telecommunications operator into a technology investor, a deal would strengthen its foray into mobile payments at a time when cash usage is declining. The company last year launched PayPay, a mobile app payment system, with partner Yahoo Japan Corp.
“It could potentially be quite savvy for them to invest via a convertible structure because they protect their downside with the bond yet still have upside should the business perform well in the future,” said Rob Chandra, a general partner at Avid Park Ventures and a lecturer at the Haas School of Business at the University of California at Berkeley. “We are in the early innings of a massive global shift to electronic payment processing. If Wirecard’s issues are behind them, then this could be a smart investment.”
SoftBank has reshaped the startup landscape with the Vision Fund, which is in talks with investors to add as much as $15 billion more to its current $100 billion value, people familiar with the discussions said earlier this month. Over about two years, the Vision Fund has invested more than $70 billion in tech companies.
The payment sector has yet to see the emergence of a clear global leader. PayPal Holdings Inc., Ant Financial, Tencent Holdings Ltd. and Paytm have all become major players, albeit in limited geographies, while Apple Inc. and Samsung Electronics Co. haven’t gained significant market share.
(Adds German trading in third paragraph, analyst comment in fourth.)
–With assistance from Dinesh Nair, Sarah McBride and Stefan Nicola.
To contact the reporters on this story: Eyk Henning in Frankfurt at [email protected];Ruth David in London at [email protected]
To contact the editors responsible for this story: Kenneth Wong at [email protected], ;Aaron Kirchfeld at [email protected], Andrew Pollack, Chris Reiter
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