16 ★ FINANCIAL TIMES Tuesday4 February 2020
COMPANIES
P H I L I P G E O R G I A D I S —LONDON
L E I L A A B B O U D— PARIS
Worldline,theFrenchpaymentservices
business,hasagreedadealtobuyIngen-
ico, a local rival, in a €7.8bn deal that
aims to create a European champion in
arapidlyconsolidatingindustry.
The companies said yesterday the
cash and shares deal would create the
world’s fourth-largest payment services
provider, with combined revenues of
€5.3bn last year servicing almost 1m
merchants. It brings together World-
line’s strength among merchants in its
European stronghold, and Ingenico’s
leadership in payments hardware, as
wellasitsonlinecommercebusiness.
The payments sector has been a hot-
bed of dealmakingin recent years, as
companies seek scale to exploit better
rapid changes in consumer behaviour
sparked by the rise of online shopping
andubiquityofsmartphones.
Given that Worldline is spending only
€2bn in cash on the deal, the combined
group will soon be able to make further
acquisitions to keep up with larger US
rivals such asFiserv nda Global Pay-ments, saidGilles Grapinet, Worldline’s
chairmanandchiefexecutive.
“It’s important for Europe to have a
payments champion able to compete
with the global leaders in a high-
technologyindustry,”hesaid.
Ingenico shareholders can expect to
receive €123.10 per share, a 17 per cent
premium on Friday’s closing price, or a
mixofcashandshares.Worldlineshare-
holders will end up owning 65 per cent
ofthecombinedgroup.
The companies predicted that earn-
ings per share would rise by double dig-
its and promised cost savings of €250m
annually by 2024from rationalising
back-office functions, procurement andother activities. There would be job cuts
from the 20,000 combined staff, but
many would probably be reassigned
internally given strong growth pros-
pects,saidMrGrapinet.
Ingenico has long been seen as a take-
over target as it struggledwith declining
sales in its hardware business. Natixis,
the French bank, explored acombina-
tion n 2018 and companies such as Ger-i
many’s Wirecard and France’s Atos had
alsobeenmootedaspotentialbidders.
The companies spoke of a cultural fit
giventhatbothareFrench,andsaidthat
Bpifrance, the state-backed investment
fundandIngenico’sbiggestshareholder,
supported thedeal.Olivetree Financialanalysts said it would not be “straight-
forwardfornon-Frenchcounterbidders
to compete” since the deal would create
a“nationalchampion”.
Cédric O, digital economy minister,
welcomed the deal. “Size is really
important in this business,” he told the
Anglo-AmericanPressAssociation.
Thegroups expected the deal to close
in June or July, subject to regulatory
clearance. Worldline sharesfell 0.5 per
cent,whileIngenico’srose15.4percent.
Morgan Stanley and Cardinal Part-
ners advised Worldline. Goldman Sachs
andRothschild&CoadvisedIngenico.
Additional reporting by Victor Mallet
See LexM Y L E S M C C O R M I C K A N D A L I STA I R G R AYUS regulators are seeking to scupper
Edgewell Personal Care’s planned pur-
chase of shaving pioneerHarry’s no
competition grounds, highlighting the
obstacles facing legacy consumer
goods groups as they try to revive
growththroughstart-upacquisitions.The Federal Trade Commission isfiling
a lawsuit to block the $1.37bn takeover
of Harry’s by the company that makes
Wilkinson Sword, arguing the combina-
tion would “eliminate one of the most
important competitive forces” in the
industry.
Officials saidyesterday that for many
years Edgewell, which also owns the
razorbrandSchick,hadenjoyeda“com-
fortableduopoly”intheshavingmarket
along with Gillette-ownerProcter &
Gamble.
Harry’s, which sells razors and shav-
ing products through an online sub-
scription service and in stores, had
threatenedtheirdomination.
Daniel Francis, deputy director of the
FTC’s Bureau of Competition, said the
company, founded in 2013, had “forced
its rivals to offer lower prices and more
optionstoconsumers”.
Edgewell’s planned acquisition of
Harry’s is among several deals to which
makers of some the world’s most
famous household brands have turned
astheytrytorestorehighgrowthrates.
In products from food to personal
care, shoppers have defected to trend-
ier, healthier and more convenientalternatives — as well as cheaper in-
houseproductsdevelopedbyretailers.
The grooming business has been
under particular pressure. As well as
intensifying competition it has to con-
tend with a tendency for men to shave
lessfrequently.
Unilever truck a deal in 2016 to buys
Dollar Shave Club, another start-up, for
$1bn. Last month, P&G agreed to buy
Billie, a subscription-based grooming
brand for women, for an undisclosed
sum.
The regulatory objections to the
Harry’s deal is the latest sign that the
acquisitive growth strategy has its lim-
its.Investorsarealsoscepticalaboutthe
rationale for some of the transactions.
The threat to Harry’s deal sent Edgewell
sharesup8percentonMonday.
Harry’s was started byAndy Katz-
Mayfield nda Jeff Raider, who met as
interns at private equity groupBain wot
decades ago. The company also has a
conventional store presence, and sells a
Flamingo brand for women as well as its
eponymousbrandformen.
The co-founders of Harry’s saidyes-
terday that they were disappointed by
the FTC’s announcement and insisted
the combination would “deliver excep-
tional brands and products at a great
value”.
Rod Little, president and chief execu-
tive of Edgewell, said: “We continue to
believethecombinationofourtwocom-
panies would bring together comple-
mentary capabilities for the benefit of
allstakeholders,includingcustomers.”
When they announced the planned
dealin May, the two companies said
they would combine Harry’s experience
in brand-building and direct-to-
consumer marketing with Edgewell’s
intellectualpropertyandglobalscale.
However, in laying out its caseyester-
day, the FTC said that “Edgewell’s effort
to short circuit competition by buying
up its newer rival promises serious
harmtoconsumers”.N E I L H U M E A N D J O S E P H C OT T E R I L L
CAPE TOWN
South Africa’s biggest mining group
Anglo American as welcomed plansh
by the government to abandon rules
that left the industry reliant onEskom,
the struggling power monopoly, for its
electricity.
Speaking at a major mining conference
in Cape Townyesterday, the country’s
mineral resources and energy minister,
Gwede Mantashe, said the mining
industry would e allowed to generateb
electricityforitsownuse.
“You will not need a licence for that.
You will be registered to run ahead with
the project,” he told delegates at the
Mining Indaba conference, earning a
roundofapplause.
Hit hard by ower blackouts, knownp
as load shedding, miners have been lob-
bying the government for permission to
startgeneratingtheirownpower.
Hillside, South Africa’s only primary
aluminium smelter, was load shed 52times last year, according to its operator
South32, which has voiced concerns
aboutthepriceofpowerinSouthAfrica.
Anglo chief executiveMark Cutifani
said he was pleasantly surprised bythe
announcement. As recently as October,
Mr Mantashe had been opposed to
changing the rules rapidly. “We are very
pleased,” said Mr Cutifani. “He’s given
theindustryagoodhearing.”
Anglo was founded in South Africa
and enerates a significant amount ofg
revenue from its platinum, iron ore andcoal mines in the country. Mr Cutifani
said Anglo had tarted work on severals
pilot projects, including a large-scale
solar development at its Mogalakwena
platinum mine. Creating a supportive
environment for projects such as these
would add additional power to the
nationalgrid,headded.
Eskom generates nearly all of the
electricity for Africa’s most industrial-
ised economy, but it is buckling beneath
billions of dollars of debts and has failed
toreplaceageingpowerstations.Mr Mantashe also surprised investors
with a pledge to set up a power genera-
tioncompanyoutsideEskom.
“We’ll talk to investors to start a gen-
erating company outside Eskom... we
must have a fail-safe option of deliver-
ingenergy”beyondtheutility,hesaid.
Becauseoffrequentbreakdownsatits
ageing coal power stations, Eskom can
only generate about two-thirds of its
official45,000MWcapacity,forcingitto
impose its worst ever rolling blackouts
inrecentweeks.Financials
Worldline agrees €7.8bn deal for Ingenico
French payment operator
snaps up hardware group
and predicts more deals
ObituaryFolksy tycoon who became symbol of corruption
Bernard Ebbers
WorldCom chief executive
1941-
‘I suppose
buying
more and
more
companies
makes it
easier to
hide
what’s
really
going on’
BernardEbbers,theex-WorldCom hiefc
executive who presided over one of the
largest US accounting frauds in history,
hasdiedaged78.
Ebbers,aformerbasketballcoachand
motelowner,rosetothetopofathriving
US telecommunications industry in the
late 1990s before his name became syn-
onymouswithcorporatemalfeasance.
He was convicted in 2005 for orches-
trating an $11bn accounting fraud at
WorldCom that led to the biggest bank-
ruptcy in US history, until it was
eclipsed a few years later by the collapse
ofLehmanBrothers.
Ebbers was jailed for 25 years in 2005
but was granted early release in Decem-
ber last year after a judge found that his
healthwasdeclining.
The collapse of WorldCom had far
reaching effects within the industry. In
particular, companies became more
cautious about strategy and accounting
policies.
WorldCom completed 70 deals with
Ebbers at the helm, transforming itself
from a tiny company called Long Dis-
tance Discount Service nto the coun-i
try’s second-largest telecoms business
as it took advantage of deregulation. In
1997, it outbidBT roup to buy MCI forG
$37bn, which was billed as the largest
corporatemergerinhistory.
That triggered a wave of consolida-
tion, but WorldCom’s momentum fal-
tered in 2000 when it failed to win a
licence to build a 3G network in the UK,
and a blockbuster $129bn deal to merge
with US rivalSprint as shot down byw
regulators.
The company started to miss its
financial targets and Mr Ebbers
implored his staff to “hit the numbers”.
Thecompanystartedaccountingforthe
cost of building fibre-optic broadband
networksoveralongperiod,ratherthan
upfront, which flattered its earnings
untilthefraudwasuncovered.
The fraud undid what was seen as one
of the great US business rags-to-riches
stories of its era. Mr Ebbers was born in
Edmonton, Canada and dropped out of
college to work as a milkman and a
bouncer. He spent time in Mississippi
after he won a basketball scholarship
and returned to the state to establish
what would become its largest company
duringthetelecomsboom.
The fortunes of Ebbers were tied to
the company’s share price because he
had repeatedly borrowed money
against the value of his WorldCom tocks
to buy land, other companies and
yachts. He was ousted from the com-
pany in 2002 owing $400m to the busi-
ness,accordingtoreportsatthetime.
During his six-week trial, Ebbers
adopted what lawyers called the
“Ostrich defence” arguing that he did
not know about the fraud. He hoped his
folksy manner would swing the jury
behind him. The prosecution case
rested largely on the testimony of
WorldCom chief financial officer, Scott
Sullivan. Unlike other chief executiveswho stood trial in that era, Ebbers took
the witness stand in his defence, insist-
inghehaddonenothingwrong.
Evidence from Mr Sullivan and other
WorldCom executives painted a picture
of a cost-obsessed, domineering boss
who counted coffee filters in the office
because he suspected that his staff were
taking coffee home. He was also said to
have suggested secretly filling water
coolers with tap water to save money
and resented staff taking long walks
around a pond at the company’s head-
quartersinClinton,Mississippi.
The length of his sentence sent a chill
through US corporate boardrooms.
David McCourt, who joined the World-
Com board after selling his company
MFS to Ebbers for $14.6bn, said in his
book Total Rethink: “Bernie was put in
prison for life, being given more time
than a guy who tried to blow up Los
Angeles International Airport, which
doesn’tseemright”.
Mr McCourt argued that it was “per-
fectly feasible” that Ebbers had notknown about the fraud and had lost
touchwithwhatwasgoingonbelowhim
in the company. Reid Weingarten, of
Steptoe & Johnson, the law firm repre-
senting Mr Ebbers, said his client had
been “transformed into a symbol of cor-
poratecorruption”.
The ollapse of WorldCom, which wasc
later sold toVerizon, was profound for
the industry. Robert Grindle, an analyst
at Deutsche Bank who has covered the
industry since 1997, saidEbbers was
considered “a great guy at the time as
WorldCom was a roll-up buying larger
and larger companies [and] the stock
kept going up. I suppose buying more
and more companies makes it easier to
hidewhat’sreallygoingon”.
He said that WorldCom’s accounting
policies meant that European telecoms
analysts still focus on the cash flow of
companies likeVodafone ather thanr
the earnings per share metric that was
more common in the boom time when
WorldComwasinitsprime.
Joshua Chaffinand ic FildesNBernard Ebbers
leaves a New
York court in- The
businessman
was convicted
of orchestrating
an $11 billion
accounting
scandal that
bankrupted
WorldCom
Louis Lanzano/AP
Personal goods
US regulators
look to block
Edgewell’s
$1.4bn deal
for Harry’s
The grooming business
has to contend with a
tendency for men toshave less frequently
Energy
South African miners applaud move to cut reliance on Eskom power plants
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+44 (0)20 7873 3000, or viewed atwww.FT.com/advertisingFEBRUARY 4 2020 Section:Companies Time: 3/2/2020- 19:22 User:sanjay.gohil Page Name:CONEWS3, Part,Page,Edition:LON, 16, 1