Barclays, a leading British multinational bank with a strong presence in consumer, corporate and investment banking, and Brookfield Asset Management, have announced a strategic long-term partnership to transform Barclays’ payment acceptance division.
The business, formerly known as the merchant acquiring arm, will be developed into a standalone entity under the Barclaycard Payments brand, according to FF News.
The partnership aims to grow and modernise Barclays’ payment acceptance business, which plays a critical role in the UK economy by processing billions of pounds in transactions annually.
By joining forces, the firms intend to enhance client offerings, increase technological capabilities, and drive financial performance through strategic transformation.
Barclays brings to the table deep client relationships and decades of experience in the UK payments landscape.
This will be complemented by Brookfield’s global private equity expertise in payments, technology, operational transformation and corporate carve-outs. The collaboration is designed to strategically position the business for long-term growth in a rapidly evolving FinTech environment.
Barclays plans to invest around £400m into the business over the first three years of the partnership.
Brookfield will provide strategic and operational support throughout the transformation and, as part of the deal structure, will be entitled to a performance-based financial incentive. This incentive aligns both parties and underscores Brookfield’s commitment to the success of the initiative.
A key feature of the agreement is the path towards ownership. Between the third and seventh year of the partnership, Brookfield has the option to acquire up to a 70% stake in the business, contingent on certain conditions, including Barclays fully recovering its investment.
Upon this transaction, Brookfield’s initial performance incentive will convert into an additional 10% shareholding, giving it approximately 80% ownership. Barclays is expected to retain a 20% interest.
The business will continue operating under the Barclaycard Payments brand and will remain the exclusive provider of payment acceptance services to Barclays’ clients for a minimum of ten years. Despite the scale of investment, Barclays states that the move will not materially impact its current financial guidance or performance targets.
This transaction marks the inaugural deal for Brookfield Financial Infrastructure Partners (BFIP), a branch of Brookfield’s private equity business. BFIP focuses on digital financial assets and infrastructure.
Brookfield has an established track record in the financial infrastructure space, having previously invested more than $5bn in deals including the carve-out of Magnati in partnership with First Abu Dhabi Bank, and the take-private of Network International.
Barclays UK Corporate Bank CEO Matt Hammerstein said, “Finding a partner to support us in transforming our payment acceptance business, in a way that will enable us both to serve our clients’ interests better and pursue a path to releasing value from the business, demonstrates clear execution of our three-year plan to become a simpler, better and more balanced bank. We have a leading position in the UK, but we know that our payments clients are increasingly looking for integrated connectivity, an end-to-end service and tailored technological solutions from their payments providers. Our partnership with Brookfield recognises the opportunity within our business to go beyond the foundations we have built to date.”
Brookfield vice chair and head of financial infrastructure Sir Ron Kalifa said, “Payments systems need to adopt a digital-first and data-led approach to provide world-class solutions to clients. We’re excited to draw on our deep global payments expertise to partner with Barclays and together deliver the operational transformation required to create the market leader, well-positioned to drive the growth of the UK’s digital economy with innovative and integrated payment solutions.”
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