Amex to acquire Payback & Loyalty Partner
American Express is to acquire Loyalty Partner, the loyalty marketing firm that operates the Payback coalition programme in Germany, Poland and India, as well as provided retailers with market analysis, platforms, and consulting services.
The acquisition is intended to boost American Express' merchant relationships in several international markets, add more than 34 million consumers to the company's international customer base, and expand its range of rewards and loyalty marketing services.
Through Payback, loyalty cards are distributed to millions of cardholders who can earn points and claim discounts and other exclusive benefits from thousands of merchant partner locations. Merchants fund the consumer offers and Loyalty Partner earns revenue from operating the platform and providing marketing support though its network of relationship managers.
"The loyalty coalition model is growing rapidly in many parts of the world," said Ed Gilligan, vice chairman for American Express. "Increasingly, consumer decisions about where to shop and how to pay are based on loyalty offerings. We recognise that network scale, technology, marketing expertise and customer loyalty are keys to a new generation of mobile and location-based digital marketing services."
According to Alexander Rittweger, Loyalty Partner's founder and CEO, "Joining with American Express will help us to accelerate our expansion into international markets and allow us to provide greater value for consumers, as well as help our coalition partners grow their businesses."
Upon completion of the deal, Loyalty Partner will become a subsidiary of American Express and be part of the company's International Consumer and Small Business Services group, led by the group's existing president, Douglas Buckminster. Rittweger will continue as CEO for Loyalty Partner.
The purchase, which is still subject to regulatory approval, is expected to close during the first quarter of 2011. The transaction, which values the company at 496 (US$660) million, consists of an up-front cash purchase price of 425 (US$566) million and an additional 71 (US$94) million equity interest, which will be held by Loyalty Partner's management. American Express will acquire that interest over the following five years at a value based on business performance. UBS Investment Bank acted as the sole financial advisor, and Cleary, Gottlieb, Steen & Hamilton acted as legal advisor to American Express.
Loyalty Partner's history in brief... Alexander Rittweger founded Loyalty Partner in 1998 with three members of staff and no venture capital investors. Inspired by his consultancy work for Deutsche Lufthansa and its frequent flyer programme Miles & More, he developed the vision of a cross-sector and multi-media bonus programme. His business plan convinced the then Lufthansa CEO Jurgen Weber and his employer Roland Berger.
Launched in 2000, the Payback loyalty bonus programme is based on having partner companies that are highly relevant to customers. A cross-sectoral and multi-media partner alliance was therefore vital to Rittweger's vision, so he approached only what he considered to be the top companies from the retail and service sectors. Metro, with Galeria Kaufhof and Real,- as well as companies such as Europcar and Apollo-Optik all agreed to join the programme. Today, more than 20 offline and 300 online partners participate in Payback.
The know-how built up during the development of Payback is also made available to other companies, and Loyalty Partner offers tailor-made IT solutions for the operation of loyalty bonus programmes, counting Deutsche Bahn among its clients.
In 2003, Emnos began operations as an independent subsidiary of Loyalty Partner and, within a short time, became a significant provider of insight-based marketing.
Since September 2005, the British investment firm Palamon Capital Partners has been the main shareholder in Loyalty Partner, while Metro owns nearly 10%, Alexander Rittweger owns about 16%, and Roland Berger owns about 8%.
In August 2008, Loyalty Partner Solutions and Payback were separated off and began to operate as legally independent subsidiaries. According to Rittweger, this restructuring was undertaken in response to strong company growth and to help ensure optimum levels of customer support throughout the business.
In September 2009, Payback announced its expansion into Poland, representing the programme's first foray into international territory, with consumers there being able to collect points through ten of the country's major brands, including BP, Real, telecoms firm TP, mobile network operator Orange, and internet auction site Allegro. By October 2010, the programme had issued its 6.5 millionth card in Poland.
In May 2010, Payback launched its first mobile phone application, allowing programme members who shop with Payback partners to use their Apple iPhones to redeem customer-specific coupons. The mobile app also gives users the opportunity to collect Payback points through regional promotions - for example, when making restaurant reservations. Customers can also use the new app to get updates about their points balance, and to identify the locations of (and quickest routes to) all Payback partner stores.
In June 2010, Payback purchased a controlling stake in the Indian loyalty programme i-Mint, aiming to combine the two programmes' expertise in India, a rapidly growing consumer market. At the time, Rittweger confirmed that the investment is both strategic and long-term, and is intended to create "a world class customer retention and direct marketing platform" to support the retail revolution that has been rapidly developing in India.
Payback currently claims approximately 24.6 million active cardholders in Germany and Poland (combined), with members collecting points in-store from 340 retailers and from a range of online partners. Partners in Germany include Aral, dm-drogerie markt, Galeria Kaufhof and real and, in the online sector, Amazon, Apple, eBay, Otto, Baur, C&A and Expedia.
In Germany, more than 60% of households have a Payback card, and 83% of the population are familiar with the Payback brand. According to an Emnid study, the card is the third most commonly carried card in Germany (after EC payment cards and health insurance cards).
Each year, Payback cards have been linked to sales worth some 19 billion. Payback points can be redeemed for vouchers, Lufthansa miles, charity donations and other rewards, and the programme's redemption rate currently stands at 90%.