In a bid to fortify its roots in the rapidly growing emerging markets, MasterCard Inc. (MA) disclosed its intention to acquire Turkey’s leading independent payment solution provider and processor − Provus Bilisim Hizmetleri AS (Provus). However, the terms and value of the deal have yet to be revealed.
Based out of Istanbul, Turkey, Provus is a 12-year old company that offers issuer, merchant acquiring, prepaid and ATM payment processing solutions, to financial institutions, telecommunication service providers and retailers. Subject to regulatory approvals, the deal is expected to culminate by the end of 2013.
Furthermore, the deal blends well with MasterCard’s long-term strategy of building secular growth through innovative organic initiatives. Over the past couple of years, the company has been strengthening its foothold in the prepaid cards space and mobile commerce (m-commerce). These initiatives have been taken to adapt to the changing market dynamics and navigate through regulatory challenges faced within the credit and debit card businesses.
These initiatives have also helped the company better penetrate into the global markets. Expansion in Turkey will now strengthen MasterCard’s footprint within Europe as well. Hence, the acquisition of Provus appears to be a well-fit in the company's business basket.
Moreover, MasterCard is armed with a strong operating cash flow of $1.61 billion at the end of Jun 2013, which surged about 51% from the year-ago period, along with a risk-free balance sheet, strong expense management and double-digit financial growth. We believe such strong fundamentals progressively support the company’s capital deployment efforts.
Additionally, MasterCard is consistently taking effective steps to penetrate into the emerging markets. Earlier this week, the company launched the first prepaid travel card in Myanmar, via its alliance with CB Bank in the country. MasterCard also tapped the Italian market by partnering with Eataly, thereby boosting cashless payments.
Along with MasterCard, other strong peers such as Visa Inc. (V), Fiserv Inc. (FISV) and Xoom Corp. (XOOM) carry a Zacks Rank #2 (Buy).
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