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SoftBank to consider acquiring 5% stake in Wirecard
[FRANKFURT] SoftBank Group Corp is considering an investment in Wirecard AG that could give the Japanese conglomerate a 5 per cent stake in the beleaguered German internet payment firm, according to people familiar with the matter. Wirecard's American depositary receipts jumped on the news.
SoftBank has hired financial advisers and is working on a deal to acquire bonds that can be converted into Wirecard shares, said the people, who asked not to be identified because the information is private. Should an agreement be reached, it could be announced as early as this month, they said.
A representative for Tokyo-based SoftBank declined to comment. A spokeswoman for Munich-based Wirecard didn't respond to emails and phone calls requesting comment after business hours. No decision has been made and the plans could still change, the people 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's earlier this year - cut by about a quarter to 15.3 billion euros (S$23.3 billion).
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.
Wirecard's American depositary receipts gained 6.8 per cent to US$71.79 at the close in New York. Each ADR is equal to half a regular company share.
An agreement with SoftBank would follow weeks of discussions by the companies' top management, said the people. SoftBank could buy more Wirecard shares on the market at a later stage, one of the people said.
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, in which SoftBank's technology-focused Vision Fund owns a 15 per cent 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, in which SoftBank owns a stake.
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 the usage of cash 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 US$15 billion more to its current US$100 billion value, people familiar with the discussions said earlier this month. Over about two years, the Vision Fund has invested more than US$70 billion in tech companies.
The payment sector has yet to see the emergence of a clear global leader. PayPal Holding, Ant Financial, Tencent Holdings and Paytm have all become major players, albeit in limited geographies, while Apple and Samsung Electronics haven't gained significant market share.