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Silver Lake to make 2.8x from sale of Mercury Payment

Silver Lake Partners stands to make close to three times its investment in Mercury Payment Systems, which has agreed to be acquired by Vantiv for $1.65 billion.

The deal represents a 4-year hold for Silver Lake, which acquired the majority of Mercury Payment in April 2010 for $450 million, according to SEC filings. The investment, which was all cash and did not include any debt, appears to have come from Silver Lake’s third large-cap technology investment fund.

Since 2010, Mercury Payment has made three distributions to its owners, including Silver Lake, totaling $371.24 million, SEC filings indicate. This includes a $223 million dividend recap in 2011, a $119.2 million distribution in 2012 and $29.04 in 2013, regulatory filings indicate.

Silver Lake owns 62.3 percent of Mercury Payments. This means the PE firm likely recouped about $231.3 million, or more than half of its investment, in distributions. Silver Lake will likely receive about $1.03 billion from the sale to Vantiv. Including the dividends, Silver Lake stands to make 2.8x its investment in four years. A source familiar with the deal said Silver Lake would actually make closer to 3x on the deal.

Founded in 2001, Durango, Colo.-based Mercury is a non-bank payment processor targeting small and medium-sized merchants, such as restaurants and stores, in the United States and Canada. The company generated $237 million in net revenue in 2013. Mercury also processed over $34 billion in payments volume last year, the filing said.

Mercury had filed to go public in March. On Monday, the company said it was suspending activities related to the IPO and would withdraw its registration statement.

The sale to Vantiv is expected to strengthen Vantiv’s presence in the integrated payment systems market, Reuters reported.

Silver Lake last year closed its latest large-cap technology investment fund at $10.3 billion. The firm’s prior large-cap fund, Silver Lake Partners III LP, collected $9.3 billion in 2007. Performance data for Fund IV is unavailable, but Fund III had a net IRR of 16.1 percent as of Sept. 30, according to CalPERS.

Silver Lake declined comment on the sale of Mercury Payment. Executives for Mercury Payment could not immediately be reached for comment.

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