Mobile money company Monitise (LSE: MONI) put itself up for sale several weeks ago but, so far, no buyer has emerged. But it looks as if European banking giant Santander (LSE: BNC) could be the perfect suitor for the company.
You see, there’s not much value left in Monitise’s business model. The company continues to lose money hand over fist. However, there is value in the company’s existing relationships with banks. One of these banks is Santander.
What’s more, Santander is looking to increase its own digital presence. Indeed, Santander has 92m retail customers globally, of which only 12.2m do most of their banking with Santander.
Management has stated that it wants to hike this figure to 17m by 2017, which the bank believes could add €2bn to €3bn of additional income.
Then there’s Monitise’s partnership with IBM to consider.
Value in the cloud
In order to reassure customers about the security of their online accounts, Santander is to be the first global bank to offer cloud data storage services to corporate clients. As one of the world’s largest tech companies with a huge presence in the cloud computing sector, IBM could be a key partner for Santander’s cloud development — IBM could be considered to be another bidder for Monitise.
Still, as mentioned above, Monitise already has a number of valuable relationships with European banks and other large corporate clients, which would give Santander a huge base from which to sell its new cloud offering. If Santander snaps up Monitise for itself, Europe’s largest bank could quickly find itself the data- and payment-processing company of choice for large financial institutions around Europe. This would align with the bank’s goal of become more digitally orientated and expand the group’s influence.
Time to buy
Should investors buy Monitise ahead of a possible deal? Well, buying in the expectation of a possible takeover is often a fool’s errand. There’s no guarantee that this time it’ll be any different.
Moreover, Monitise is struggling to turn a profit and the company’s losses are only increasing. For example, the company’s fiscal first-half 2015 results showed that group revenue had fallen to £42.4m, from £46.5m during the first half of 2014. The company’s statutory loss after tax rose to £56.8m compared to a loss of £22.0m as reported in the year-ago period.
