Optimal Payments purchase Skrill Group

Optimal Payments will purchase Skrill, greatly improving their online payment processing market share. (Image: Optimal Payments)

Optimal Payments has reached an agreement to purchase fellow payment provider Skrill Group for approximately €1.1 billion ($1.2 billion).

This move could help Optimal become a much bigger player in the world of digital payment processing, an area that Skrill (formerly Moneybookers) has long been a leader in.

Optimal is acquiring Sentinel Topco Limited, the parent company of the Skrill Group, for a combination of more than 37.4 million ordinary shares of stock and €720 million ($786 million). Sentinel Group Holdings, the group that formerly operated that company, will hold on to a little less than 8 percent of the company as a result.

Move Will Increase Scale for Optimal 

According to Optimal Payments chairman Dennis Jones, this purchase could provide huge dividends for the company in the UK.

“We are taking advantage of an exceptional opportunity to acquire a business we know very well which, combined with Optimal Payments, will be a leading UK based online payments business with the essential scale necessary to be highly successful,” Jones said. “These opportunities are few and far between.”

One of the biggest advantages for Optimal is that this acquisition will both give the company a more diversified client base and bring one of their biggest competitors on board, which could make it easier for the company to connect with customers at online gambling sites and at other merchants.

“We believe the combination of the two wallets will remove the friction which comes from competition for merchants and consumers,” said Ivor Jones, an analyst for Numis Securities.

Revenues Up for Optimal in 2014

Optimal has been growing in the last few years, with their NETELLER and NETBANX brands both performing well. In particular, Optimal Payments President and CEO Joel Leonoff says that the company has been able to establish “a solid foundation for our future in the evolving regulated US online gambling market.”

The result was that revenue for 2014 was up to $365 million, up 44 percent from the previous year. While that number was boosted by the World Cup, which provided benefits for virtually any company that was even tangentially related to online sports betting.

Right now, 27 percent of the company’s revenue comes from North America, but that number could improve even further based on the increasing US operations they have engaged in through their California subsidiaries.

“We have continued to develop our relationships with current and potential merchants and have forged successful partnerships in the rapidly developing area of fantasy sports leagues,” Leonoff said.

Skrill Was First Digital Wallet in New Jersey Online Gambling

Purchasing Skrill will only make Optimal’s American operations even stronger. Skrill worked hard to become regulated in markets like New Jersey, where they were the first digital wallet service that was approved to be offered by casino sites in the state.

In an interview last year, Skrill USA Vice President Joseph Hall said that his company had had a money transmission license for a few years and that the payment processor was far from a new kid on the block.

Hall also said that the key to having better acceptance rates for payments in New Jersey and other regulated jurisdictions in the United States might lie in offering flexibility, rather than trying to get banks to universally accept online gambling transactions.

He noted that given the ubiquitous penetration of credit cards in America, accompanied by Visa and MasterCard’s relatively poor approval ratings, digital wallets are of paramount importance in that they provide numerous ways to deposit and withdraw funds from gambling sites, not just via credit cards.