Today Earthport the cross-border Automated Clearing House for payments announced it was recommending an all-cash bid from Mastercard. The offer of £233 million ($305m) compares to the £198 million ($259m) bid from VISA announced on 27 December, an increase of almost 18%. Earthport is of interest to the blockchain community because it’s been a Ripple partner since 2015 and Earthport powered Santander’s first blockchain cross-border payment app.
The market seems to think that VISA may launch another offer as at some point today the price of 35.5 pence was above the Mastercard offer of 33 pence per share. The Earthport board also proposes to adjourn the February Earthport shareholder meeting which was to consider the VISA offer.
The VISA bid was almost four times the stock price before the offer, and the new Mastercard offer is nearly five times the Christmas eve price. The offer is quite a turnaround for Earthport where the December 2018 price had dropped by 73% since September 2017. However, there was a share placing in October 2017 which diluted the price. Nonetheless, the offer is 65% above the price of that placement.
In the year to 30 June 2018 Earthport earned revenues of £31.9 million ($40.5m) and made a loss of £8.4 million ($10.7m). It processed $17.5 billion in payments in 2017. Apart from Ripple, the company has numerous high profile clients including Bank of America Merrill Lynch, TransferWise, BNP Paribas and Xoom. However, the company was under pressure as the result of what it referred to as “the loss of a major strategic payment customer and material delays occurred in the implementation process for another strategic partner.”
Much like Ripple, Earthport helps banks, remittance companies, and corporates avoid some of the costs and painfulness of the correspondent banking system. International payments typically involve multiple banks getting involved as go-betweens in cross-border transfers which is slow, costly and prone to error. Earthport positioned itself as a hub.
“Earthport saved us the cost and time to build the relationships we’d need to have in place to have a footprint in all these destination countries,” said the CEO of remittance company Xoom, according to Earthport’s website. Paypal bought Xoom for $890 million in 2015.