Wirecard agreement to buy Beijing's AllScore surprises analysts

Wirecard has announced the acquisition of AllScore Payment Services in a deal that has raised questions by analysts. 

The acquisition, made public last week, will see the German online, mobile, and at the point of sale (PoS) payments facilitator hand over up to €109 million. 

This number is made up of a €72.4 million capital injection awarded to AllScore until closing -- subject to closing conditions, the minimum payment will be €38.6 million -- and an earn-out payment of up to €16.7 million in order to acquire 80 percent of AllScore, a majority stake.

Wirecard then holds a call option to purchase the remaining 20 percent of shares for up to €20.2 million within two years. 

The gradual acquisition of the Beijing-based online payments provider is part of Wirecard's ambitions to expand its digital payment license portfolio. Wirecard added that the step "underlines strategy to expand its global technology platform by way of cross-border licenses," which includes a move into China. 

Markus Braun, Wirecard CEO, said: "The Chinese market represents a tremendous opportunity for Wirecard." 

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Founded in 2007, Beijing-based AllScore is a local payment provider that works with Chinese merchants and facilitates cross-border trading. Wirecard says that AllScore also holds an "attractive" licensing portfolio. 

"The license portfolio also provides Wirecard with the capability to issue payment cards to consumers and companies in China," according to the company. 

Yao Lin, founder and CEO of AllScore, said the acquisition will bolster the efforts of the Chinese government to "open the financial sector and improve the regulatory environment for market access to foreign investors."

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However, analysts are not so sure. As reported by The Financial Times, Bernstein sales trader Harry Heneage said the deal marks a two-year mergers & acquisitions (M&A) hiatus for Wirecard and the agreement "comes as a surprise."

In an analyst note, Heneage said that there are more "questions than answers" at this stage, especially given that research on AllScore reveals little more than a generic Chinese website. 

The purchase of AllScore follows an investigation into Wirecard's accounting practices. KPMG has been hired to audit the company after allegations were made that the company inflated its reported sales and profits.

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In related news, Wirecard recently announced a new partnership with HERE Mobility. The companies are working together to develop B2B2C payment services in the transport industry, and Wirecard believes there is transaction potential of over €10 billion per year "when all HERE Mobility services are rolled out."

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