Italian payments providers Nexi and Sia are set to finalise a €15bn merger that will create one of Europe’s largest fintech groups, according to three people involved in the negotiations.

The boards of both companies are due to meet on Sunday evening to approve a combination that has been under negotiation for almost two years. A deal could be announced soon after the meeting concludes.

The all-share deal would extend the pressure on Europe’s payments providers to consolidate further, increasing their size as online purchases intensify during the pandemic and as consumers move away from using physical cash.

Talks between the two Milan-based companies intensified this year after French payments operator Worldline agreed to acquire Ingenico for €7.8bn, to become the largest payment provider in Europe.

Under the deal, Nexi will approve a reserved capital increase for Sia, whose main investor is the private equity arm of Cassa Depositi e Prestiti, Italy’s state-backed investor, according to the three officials.

The new group will have a market valuation of about €15bn and it will be Europe’s largest payments provider in terms of merchants servicing, the people said. By combining their payments services and digital infrastructure, the companies aim to create a European payments champion with combined revenues of almost €2bn.

Nexi, which was floated last year in Europe’s largest listing, has an equity market capitalisation of €10.6bn. Analysts have previously put a value of €4.2bn on Sia, but people involved in the negotiations said it has been valued slightly higher.

Paolo Bertoluzzo, Nexi’s chief executive, is set to become chief executive of the enlarged group, the people said.

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CDP will become the group’s single largest investor owning about 25 per cent of the merged entity. Nexi’s largest shareholders, Mercury UK, a vehicle of private equity groups Bain, Advent and Clessidra, and lender Intesa Sanpaolo, will be diluted. Mercury UK owns 33.4 per cent of Nexi and Intesa 10.5 per cent.

People familiar with the talks said the private equity funds would gradually exit the group and details on the company’s new governance will be announced in the coming days.

“Our investment is strategic and we believe combinations delivering growth in terms of scale and international dimension will give greater value to our exposure in the rapidly evolving digital payments space,” said Intesa.

The talks between Sia and Nexi broke down several times over governance and valuation issues. One of the main hurdles around the valuation was over the terms and the extension of the contract between Sia and lender UniCredit, its main client. The agreement was extended for another 10 years to 2036 and the parties came to an agreement on the payment of upfront commissions, two people said.

UniCredit is Sia’s largest client, accounting for about a fifth of its €733m revenue last year, according to Equita analysts. Nexi, Banca Popolare di Milano and the European Central Bank are among Sia’s other main customers.

Nexi and Cassa Depositi e Prestiti declined to comment. Mercury UK was not immediately available for comment.

Via Financial Times