SoftBank to invest 900m euros in Wirecard

Frankfurt

SOFTBANK Group Corp has agreed to invest about 900 million euros (S$1,370 million) 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 per cent holding in Wirecard at 130 euros a share, the German company said in a statement on Wednesday.

Wirecard and SoftBank also agreed on a strategic partnership for digital payments. Wirecard shares jumped as much as 10.5 per cent 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 capitalisation - 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 centre 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.

"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 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 Ltd, 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 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." BLOOMBERG