Good morning. This is the conference operator. Welcome and thank you for joining Nexi's conference called Creating a Fully Integrated European PayTech Leader. As a reminder, all participants are on listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Paolo Bertoluzzo, CEO of Nexi. Please go ahead, sir.
Good morning to everybody. This is Paolo. I'm here with, as usual, Bernardo Mingrone, our CFO, Stefania Mantegazza, in charge for investor relations, and a few other members of our team. We're very sorry for this last-minute call, but I'm sure you understand how it works in these situations. Today, we're announcing the combination of Nexi with SIA. We have signed tonight, actually last night, a memorandum of understanding which defines the key terms and conditions of this combination. This is a very powerful combination between two companies that are even separately strong companies, strong payment players, but also very complementary. And this is the reason why we believe it is a very strong combination, the strong combination that creates a fully integrated European PayTech leader. I will take you through the presentation that we have been distributing a few moments ago.
Therefore, this time we'll make reference to individual pages given the fact we cannot share it this morning live. Bernardo will obviously help me in going through the contents. And then I'm sure we will have a good session of Q&A. We try to provide you with as much detail as possible. But at the end of the day, I really believe that the key messages are the ones that are summarized in page two of the presentation. Nexi plus SIA is a powerful strategic combination that brings with it three key benefits, each of them being extremely important for us and for the future of the company. First of all, it brings in market consolidation in what is, we believe, we strongly believe, Europe's most attractive market for digital payments, Italy.
Second, it creates a real digital payments powerhouse from the product, the technology, the capability standpoint across the payment ecosystem that serves, will serve a broad universe of loyal long-term customers with deep customer relationships. The third key benefit is that as we're doing all of this, we create a platform of large scale, not just a technology platform, most importantly, a business and financial platform that will allow us to capture further value-accretive opportunities in the context of European market consolidation. So three key benefits. All of this, we believe, creates a superior financial and strategic value creation. First of all, it brings with it sizable and highly visible synergies. I will comment more about this, obviously. And these synergies are leading to a double-digit cash EPS accretion from 2022 and even higher if you look at it in terms of run rate synergies.
But obviously, this is not all of the story. We also believe this creates very important strategic value for our shareholders because it creates a new entity, a new group that is best positioned to capture all the growth opportunities that we have in our sector in Europe, both organic and inorganic. So we'll give you the rest. But this is, at the end of the day, the key message that we want to leave with you today. So before we go into the details, let me try to give you the highlights of this transaction. And let me jump to page four. Seven key pillars are at the core of this transaction. We are creating a national champion in the very attractive Italian payment market with leading scale and positioning in the pan-European landscape.
This player will have a full portfolio of solution capabilities across the payments ecosystem, payment rails, and value chain. We are creating a fully integrated end-to-end technology powerhouse.
This company will have a long-standing relationship with a broad universe of loyal customers. As anticipated, this will create significant value for our shareholders from highly visible synergies with relatively low execution risk. The new entity will have superior profitability and cash generation at scale and will be best positioned to capture all the opportunities that we have in front of us in our industry, both in terms of organic and inorganic growth. As we said, this will create superior financial and strategic value creation. As I've anticipated, we have assessed a high amount of synergies with relatively low execution risk. We believe we can generate about EUR 150 million of total recurring cash synergies and one-off CapEx synergies of EUR 65 million.
This will create a 15%-20% cash EPS accretion at anticipated full run rate synergies, and the cash EPS accretion will be double-digit since 2022, assuming a 40%-50% synergy phasing. The new entity will have an EBITDA of about EUR 1 billion with strong cash generation capacity and cash conversion at around 80%. If I move to page five, let me give you an overview of the key terms of the transaction. As I've said, we have signed during the night a memorandum of understanding between us, SIA, Mercury UK, our largest shareholder, and CDP Equity, that is the largest shareholder of SIA. This memorandum of understanding includes the merger of SIA into Nexi. This will be an all-share transaction with 1.576 newly issued shares of Nexi for each SIA existing share.
The pro forma ownership of the new group will be 70/30, 70 for the Nexi shareholders, 30 for the SIA shareholders. In this context, CDP Cassa Depositi e Prestiti will own a bit more than 25% of the company, becoming the largest shareholder of the company, while Mercury will be the second largest shareholder of the company with 23%. And as you know, Mercury is a company owned by our private equity founders, I would say, Bain Capital, Advent, and Clessidra. And as you can imagine, over time, this will continue to go down. It's typical for these types of situations and deal. And Cassa Depositi e Prestiti will remain our long-term institutional shareholder committed to support the new group's strategic growth in Europe, organic, inorganic.
This 70/30 ratio corresponds to a 13.6 EBITDA multiple, including run rate synergies, which, as an underlying, as a consequence, valuation for SIA at around EUR 4.6 billion at Friday's Nexi share price. We'll go through a whitewash procedure, therefore the majority of the minority vote in the context of our shareholders' meeting to approve the merger as a condition to closing in order to exclude the mandatory tender offer. As far as governance is concerned, I've been asked to continue to lead the new group as CEO and general manager. Obviously, this is an honor, but it's also a key responsibility that will just come on top of my current responsibility and obviously be happy to do it. The board of directors will see a continuation of Nexi board of directors and corporate setup in general, which is fully aligned with international best practices.
This board will remain in office until spring 2022 for the approval of the 2021 financial statements. This board will continue to be a 13-member board of directors, of which five new participants will be designated by Cassa Depositi e Prestiti, including three independents and the vice chairman. The group chair will remain our current Nexi chair, Michaela Castelli. As far as process and timeline is concerned, we expect to sign the merger agreement around December this year, subject to the typical confirmatory due diligence and obviously contracting work to be done. The closing is expected around summer 2021, subject to the normal closing conditions, including regulatory bodies' approvals, antitrust authorities, and shareholders' approvals. So having this summary in mind, let me start by giving you a little bit of background on SIA.
I will not go into all the details of the pages that you have in front of you. Given the fact that SIA is not a listed company, we can assume or we cannot assume that you know all the details about this company. Let me try to introduce a little bit about the company. SIA is a group of companies. It's an Italian provider of mission-critical payment technology infrastructure services, serving more than 2,300 clients around 50 countries. Reality is that currently 70% of the business of the company is in Italy. Another 32% is in Europe. 31, 32% is in Europe, Western Europe, and Eastern Europe, while remaining 1% is around the world where they serve the financial institutions on very much mission-critical services. What are the main activities of this company?
This company is covering many areas of the payment ecosystem: issuing and acquiring processing, acceptance and processing of retail and corporate payments, payment solutions for public administration, national debit payment and clearing services, account-to-account and instant payment solutions, clearing and settlement systems for central institutions, access to the main network infrastructure for banks and financial institutions in an integrated way with payments, networking connectivity and blockchain interbanking services, and for a small portion of their revenues, trading and post-trading and data services for capital markets. So this is the overall picture. This is a company that has a long history of innovation and is also accompanied by super strong capabilities, especially when it comes to technology. Moving to the next page, this company operates in three major areas: card and merchant solutions that represent more than two-thirds of the revenues.
Here, as you can imagine, they serve issuing and acquiring processes for credit, debit, prepaid, including domestic schemes, Bancomat, but where they are particularly strong on top of international schemes, and they have specific services dedicated to physical commerce and e-commerce as well. Second, they have what they call digital payment solutions. It's about 21% of what they do. Here, they provide digital payment solutions for processing retail and corporate payments and for public administration. They provide clearing and settlement services for central banks, and they provide digital banking, open banking, and PSD2 solutions. Finally, network and capital market solutions, about 13% of the revenues, and here, they provide network and connectivity services for banks and financial institutions to access key European payment infrastructures and innovative blockchain-based solutions.
As far as the key financials are concerned, this is a company that has net revenues in 2019 for about EUR 728 million, cost for about EUR 450, EBITDA for about EUR 276, with a net profit of around EUR 100 million. Today, this company is number one card processor in Italy, number one card processor in Central and Southeastern Europe, number two card processor in Europe, number one in cross-border transactions in Europe. As I said, serving more than 50 countries with a very strong technology infrastructure. So why is this a powerful combination? And I move to page eight. This is a powerful combination because these two companies are really strong on different things. And when you put them together, they're strong on everything. To cut a long story short, if we go through the list here, Nexi is strong in product and digital solutions.
We are really a product and digital solutions factory with a merchant service focus. It is a platform and processing factory. We are focused and strong on front-end-driven digital innovation. SIA is stronger on back-end technology platform innovation. As you know, we are the leader for international card rails. SIA is the leader for account-to-account and national card rails. We have value-oriented partnership with over 150 Italian banks. They are the reference technology partner for banks, central institutions, corporates, and public administration. We are, as you know, the Italian home market leader. They are an established Italian player with growing European presence. So we believe this combination is creating a strong player in our industry in Italy, but also in Europe. Moving to page nine, this new group will have a strong leadership position, a strong scale, a strong reach, and strong capabilities.
As far as leadership is concerned, this group will be the number one payment company by acquiring transaction volumes in continental Europe, the number one processor in cross-border payments, the number one payment company in terms of number of merchants served in continental Europe, the number one company in terms of number of cards managed in continental Europe, the number one acquirer and card processor in Italy, number one card processor in Central and Southeastern Europe. This company will have a pro forma EUR 1.8 billion revenues, EUR 1 billion EBITDA, and EUR 0.8 billion operating cash flow, including run rate synergies. As I said, this company reaches out and manages cards for 120 million customers, serves directly or indirectly about 2 million merchants with a reach of 50 plus countries.
Most importantly, as far as capability is concerned, this company has more than 2,200 people that work in product, technology, innovation development, with six digital factories and with a total annual spend of about EUR 200 million in technology and innovation, so as you can understand from these facts, we are really creating a fully integrated European PayTech leader. If we move to page 10, we can go through the list of the seven key pillars that support this transaction and make this a real European PayTech leader. Number one, we are creating a national champion in the very attractive Italian payment market, but with a leading scale and positioning also beyond Italy in the pan-European scale landscape. Second, the company will have a full portfolio of solutions and capability across the payment ecosystem, rails, and value chain. This company will be a fully integrated end-to-end technology powerhouse.
This company has and will have a long-lasting relationship with a broad universe of very loyal customers. Number five, this deal creates significant value for our shareholders from highly visible synergies with low execution risk. Number six, we are creating a company with superior profitability and cash generation at very large scale. And last but not least, this company will be best positioned to capture the multiple growth revenues in our industry in Europe in particular, both organic and inorganic. So now I'll try to take you through each one of these seven pillars. I'll try to be a bit quick. You will have more information in the deck, but I'm sure you will ask questions as needed. Some of these concepts are already very familiar with you, so I'll try to focus on the most relevant ones. So let's start page 11.
As we said, number one, we are creating a national champion in the attractive payment market. As you know, on the left, the Italian market is very attractive because the overall card payment penetration is low. It is around 24%-25%. But this market is growing twice the rest of the European markets, around 9%-10% year over year. Furthermore, this market has very specific characteristics that make it attractive. It's a market that is dominated by SMEs. It's a market where physical commerce is dominant. E-commerce is still underdeveloped, but growing fast. It's a market where the banks maintain a key role, and therefore having strong relationships with the banks is a key success factor.
This is a market where digitalization of payments, digitalization in general, but in particular, digitalization of payments is always a top priority for the agenda of the government, as it is right now with the current government. You already know what is the position of Nexi in this market. Clearly, SIA adds a strong contribution to the Nexi platform in this market. First of all, it adds a long-term relationship with major financial institutions, where we also have a relationship, but clearly, the relationship that SIA has with some of them is different and much stronger. Second, this enhances our positioning in the national debit space, where SIA is a leader. Third, this adds leading capabilities in account-to-account that, as you know, is at the core of many innovations in our industry to come. Number four, this brings established relationships with large Italian corporates in digital payments.
Number five, this enhances our portfolio solutions for public administration, where again, SIA has deep infrastructure competencies and product competencies. Number six, this basically adds capability in terms of providing mission-critical connectivity and infrastructure services. And as we said, strengthens our position in terms of technology on processing backend platforms. Moving to page 11 and looking beyond Italy, this company will have a large scale in the European scenario and a growing footprint in the European scenario. As I said, this is one of the very top groups in Europe in terms of financial size: EUR 1.8 billion revenues, EUR 1.1 billion EBITDA, serving probably the largest number in continental Europe of merchants and consumers, with more than EUR 21 billion transactions acquiring and issuing transactions per year.
As we've said, this company has a leadership position from many, many different aspects in Europe, in continental Europe in particular, in Italy, and on top of Italy, a clear leadership position in Central and Southeastern Europe. So, as I've said, number one, national champion in the attractive Italian payment market with leading scale and positioning in the pan-European landscape. The second key point is that this company will have a full portfolio of solutions and capability across the payment ecosystem, the payment rails, and payment value chain. So, starting with the portfolio of solutions, on page 13, you see in a visual way what this company will be able to provide. First of all, the merchant services and solutions where Nexi already has strong capabilities. These capabilities will be even further strengthened.
We'll be offering SME solutions of all traditional and innovative next-generation solutions, large merchants' omnichannel solutions, e-commerce and invisible payment solutions, integrated payment management solutions from different rails, obviously merchant processing, omnichannel acceptance, sorry, omni-scheme acceptance, omni-rail acceptance, and obviously data-enabled products with business intelligence, with data science on the back of it. Second area of business will be card and digital payments, where we will offer consumer cards of all different types, commercial cards of all different types, national debit solutions, mobile payment apps from all possible across all possible payment rails, obviously card processing, next-generation customer event management solutions, and obviously artificial intelligence-based anti-fraud and next-generation solutions. If you combine merchant services and cards and digital payments, this company basically runs about EUR 1 trillion acquiring and issuing transactions per year.
Last but not least, around 20% of the business is covering digital banking and corporate solutions, where we'll be a leader in clearing solutions, instant payment solutions, corporate solutions, public administration and central institution solutions, open banking solutions, self-banking solutions, network services, blockchain solutions, and capital market solutions, so full portfolio to the benefit of our clients. Moving on page 14, this company will also cover all current and future payment rails. Without getting into the details, we will be covering international schemes, where Nexi is already very strong and SIA is adding to this trend. We will cover national schemes rails, where we also are present as Nexi, but SIA is strong and leader. We will be covering account-to-account rails, where we are also active, but clearly SIA is a leader in this space in Italy and in Europe.
We'll be covering business-to-business and corporate payments, where both companies are active, but as we put them together, the portfolio will be amazing, and last but not least, we'll be covering open banking that we consider a future rail, where Nexi is already active and strong, and SIA will add further strength, so we'll be covering all current and future payment rails. Last but not least, this new company will also have deep in-house value chain coverage and control. Here on page 15, you see a basic representation, a simplification of the value chain for issuing or acquiring, and as we are trying to represent in a graphical way, as you know, Nexi is more focused and stronger along the value chain in the downstream part, product and solutions, operations, sales, and customer management in partnership with our banks. We also are in technology platforms and processing.
SIA is also active in operations and product and solution, but it's actually stronger, and that's actually where the company is coming from in technology platforms, from basic data centers and storage, network and connectivity, processing, clearing, and management, and so on and so forth. Clearly, the combination of the two covers the full chain with strong in-house capabilities. Just to give you a couple of numbers, in technology, we will have 1,600 technology and investment specialists. In product development, we will have around 600 product development professionals. And this company will continue to work in very close partnership with banks when it comes to go-to-market. This is at the heart of both companies, and this will be a key component of our strategy going forward as it is today, both for Nexi and SIA.
So, as we said, point number two, a full portfolio of solutions and capabilities across the payment ecosystem, across rails, and across the value chain. The third key pillar is our full integrated end-to-end technology and capabilities that make us a real technology powerhouse. And again, in this page, you find a lot of data points and details. But at the end of the day, what it really means is that we will have next-generation product development and digital innovation capabilities best in class. Second, we'll have clear leadership in processing and core platforms. Third, and this is incredibly important, if you want to operate in Italy with the banks, we have deep banking system integration with superior delivery capabilities. It is incredibly important to work with banks to their benefit.
It is incredibly important to work with the banks in the banking industry initiatives such as the national scheme or clearing or open banking. Fourth, this company will have mission-critical leading-edge infrastructure capabilities, and this company will be characterized by superior service levels, availability, and security. Overall, we will have 2,200 professionals, specialists in product innovation and technology development, with about EUR 200 million of annual technology and innovation spending. So, number three, fully integrated end-to-end technology powerhouse. Moving to pillar four, this company will have long-standing relationships with a broad universe of very loyal customers. Here, on page 17, you find a very basic representation of what it means.
This company, the combination of these two companies, will work for large Italian banks, large international banks, multi-regional and local Italian banks, vertical banks, digital and new banks, systemic networks and consortia like Bancomat, like PagoPA, that is the public administration system, like CBI Globe, that is the Italian open banking system, for SMEs and small merchants, for corporates, national and international corporates and large merchants, for public administration and government, both at the national level and the local level, for central banks and institutions. And we will be serving this client at the same time with very dedicated capabilities. As you can read on the right, this company will be the trusted partner delivering mission-critical services with very critical competencies at the heart of the delivery of all of this. This company has and will have long-term partner relationships, partnership relationships with banks and financial institutions.
Most, the vast majority of the relationships with the largest clients are coming from the past and are very long-term relationships. This company has and will have strategic partnership relationships, long-term strategic partnership relationships with the two largest Italian banks being Intesa Sanpaolo and UniCredit. This company is also and will also be the strategic provider of industry-wide infrastructure and systems such as Bancomat, open banking, digital corporate banking, and so on. We'll be the natural partner for institutions for the acceleration of the digital payments penetration in our country. As you can imagine, the combination of the two companies will increase further our business resilience, given a more diversified client base and lower customer concentration. Point four, long-lasting relationship with a broad universe of loyal customers.
Moving to point five, on page 18, this deal will create significant value for our shareholders from highly visible synergies with low execution risk. Synergies will come basically from three fronts, and Bernardo will provide more detail. On the cost side, it will come from technology platforms optimization and integration, in-sourcing and operational excellence, procurement, and other cost areas. On the revenue side, it will come from the cross-selling and upselling of current and next-generation solutions to international and national clients, banks, but also from integrating further our proposition for corporates, public administration, and other institutions. And last but not least, we will also have CapEx synergies. They will come from the optimization of investments in overlapping application and product platform development. This is the recurring CapEx angle.
But also, we will have EUR 65 million of one-off savings from the rationalization of the transformation investments that the two companies have in their plans for the near future. Overall, as anticipated, we will generate EUR 150 million of recurring cash synergies. And most importantly, this combination will generate a 15%-20% cash EPS accretion for our shareholders at anticipated 400 synergies. And this cash EPS accretion will be double-digit already from 2022, assuming a 40%-50% synergy phasing. So, very strong value creation for our shareholders. Point number six, page 19, this combination will create a company with superior operating margin and cash generation at scale. We already anticipated the key numbers: EUR 1.8 billion of revenues, EUR 1 billion of EBITDA, EUR 800 million operating cash flow with a cash flow conversion, operating cash flow conversion of more than 80%.
But most importantly, this company will have further operating leverage and therefore further margin expansion potential. And thanks to all of this, this company will have superior cash generation with the ability to support at the same time the leveraging that will continue at high pace. Bernardo will talk more about this in a moment. But also, at the same time, investments in organic growth and M&A. So, point six, superior operating margin and cash generation at scale. Finally, point seven, this company will be best positioned to capture the multiple growth opportunities in our industry, organic and inorganic. First of all, this company will benefit and actually try to contribute to the Italian market's strong tailwinds that are structural, that are there, that are happening.
Second, we'll benefit from the additional contribution of our ongoing product initiatives in all the different product categories and customer categories that we went through. Third, this company will be best positioned, even better than what Nexi already was, to capture future strategic growth opportunities in areas such as business-to-business and corporate payments, open banking, next-generation account-to-account payments, data products, and artificial intelligence, and so on. Number four, as I said before, we'll be able to further expand our margin through technology platforms evolution, continued operational efficiencies, and increased operating leverage. Number five, we will be continuing to pursue local M&A opportunities, obviously in a selective way and with a focus of shareholder value creation as always. You can imagine further merchant books opportunities or product and technology capability enhancement.
Last but not least, and most importantly, in the case of this combination, this company will be in a strong position to capture international M&A opportunities, i.e., value created for our shareholders, both in terms of Baltics and countries of presence, in terms of bank-owned payment assets, and more in general as a potential actor in pan-European consolidation. So, a company that we believe will be even more resilient, even more future-ready, but most importantly, best positioned to capture the opportunities that the future of digital payments presents to us. Let me stop here for the moment, and let me hand over the floor to Bernardo.
Thanks, Paolo, and good morning to everyone from me as well.
On slide 22, we tried to summarize four of the key areas of value creation and financial benefits that stem from the merger, which draw upon some of the comments already made by Paolo earlier on. We have a very significant amount of value creation coming from EUR 150 million of recurring cash synergies, and we have a bit of detail further on. The resilience of our business model and the diversification are further improved thanks to this transaction. We increased the operating leverage, which is key in the anticipation that volumes will start to rise again after this 2020 COVID-impacted year, and therefore will provide us further benefits capturing this upside.
And in terms of cash generation, we are clearly at the top of the table of the list of payments companies in terms of the strong cash generation profile of the combined entity, and we'll have a bit more details on that. Turning to slide 23, we break up the synergies, these EUR 100 million of cost-related synergies, which come essentially from the IT part of our businesses, not surprisingly given the nature of the transaction, with EUR 50 million coming from integration of our tech platforms. And this will come, obviously, from the integration of a supplier to Nexi and our ability, therefore, to in-source part of the activities that we currently purchase outside of Nexi, and we're in the process of developing for ourselves.
Furthermore, we have another EUR 35 million coming from in-sourcing of activities primarily related to these IT platforms, which we'll be able to develop in-house rather than purchase from the outside, and streamlining of operations coming from the fact that both SIA and Nexi operate in the same market, and there is a certain degree of overlap there as well. Given our enlarged size, we have a combined cost base of approximately EUR 1 billion. We expect to generate approximately EUR 15 million on an annual basis coming from our increased buying power. Total this is EUR 100 million, which we expect to deliver in full by 2025, with between 40% and 50% achieved by 2022 and 70% by 2023. In addition to the cost synergies, we also have an estimated EUR 35 million at EBITDA level coming from the revenue synergies Paolo mentioned earlier.
This comes from the cross-selling of Nexi products and services to the SIA customer base, both in Italy and abroad, and vice versa, clearly, in Italy, cross-selling the SIA products and services to the Nexi client base. The total of this takes us to EUR 135 million of EBITDA synergies, which, as we're saying, are highly visible and obviously will be committed to giving you regular updates with regards to the degree of implementation, similarly to what we have done previously in other M&A transactions, which we have completed in the past, and to this, we add another EUR 15 million of recurring CapEx synergies, so the sum of the two players will have some overlap in terms of the planned investments. We expect approximately EUR 15 million less of this to be made, given the overlap, taking the total of cash synergies to EUR 150 million.
In addition to all the above, we then have an expected amount of EUR 65 million coming from one-off CapEx synergies, and this will help fund the integration costs we expect to be one times total recurring cash synergies. The level of synergies takes us to an EPS accretion, which was mentioned earlier, of approximately 15%-20% if you assume the full impact of these cash synergies in 2022. If you took the phased amount of synergies, this would be double-digit in any effect from 2022. On page 24, we break down the relative contributions of Nexi and SIA to combined EUR 1.8 billion of revenue and EUR 1 billion of EBITDA, including the recurring synergies. As you see from the revenue perspective, 40% of the group revenues will come from SIA.
On an EBITDA level, it's slightly less, just under 30%, in terms of the operating cash flows of around about 22.5%. In general, the combined entity will have a leverage profile which is slightly lower than the current level that Nexi has, but more importantly, you expect the deleveraging profile to be significantly enhanced and speeded up by the presence of these synergies. On slide 25, we make another important point with regards to our business mix. The pie charts here show how, in terms of relative contribution, merchant services and solutions remains the largest contributor to our business with 43%. Digital banking corporate solutions increases to 20% from its current 10% level. This classification, I would say, is a provisional one.
We have tried to represent the contribution of SIA to an enlarged group in a way which is familiar to you in terms of the Nexi reporting, and we believe this is the best way to represent it, but we reserve the right to review it later on in time once we've got into a bit of greater detail in terms of some of the smaller businesses that SIA brings to the equation. But in general, I would say it's important to note how the diversification remains. Merchant Services and Solutions remains the largest contributor to total group revenues and EBITDA.
Also, in terms of the revenue split between what is installed base and what is transaction-driven, remains well balanced with 55% of our revenues driven by the number of transactions, the number of times people swipe a card to make a payment in Italy essentially, and just under half of it remains from the installed base. SIA brings a number of licensing-related businesses or project-related businesses which classify as installed base, and the overall balance remains similar to what we have today, which obviously serves us well in environments like the one we have experienced in 2020. In terms of geographical mix, the integration with SIA adds a further leg to our business or a further dimension. We have approximately 15% or just under 15% of revenues coming from outside of Italy, whereas Nexi has been entirely Italian-focused.
Half of these foreign revenues come from Central and Southeastern Europe. The other half come from the rest of the world. And also, in terms of our client base, we have further increased our diversification, or if you want, reduced our concentration. You can see the top 10 clients now account for or will account for 43% of our revenues compared to 48% currently at Nexi. So, an even larger number of institutional and bank clients, which represent each one individually taken a slightly lower portion of our total business, which is clearly beneficial.
Slide 26 is key, I would say, to the industrial rationale and to allow us to benefit, as mentioning earlier, with the expected increase in volumes coming from the secular shift of cash-to-card payments, which is expected or is already picking up again post the trough we had in the first and second quarter this year from COVID. Our combined customer and our combined cost base will be further characterized by fixed costs, given the in-sourcing effectively we're carrying out with the merger with SIA of our variable costs, taking them from 60% currently to approximately just north of 70% on a pro forma basis. This different cost mix and improved operating leverage comes with no real impact on EBITDA margin, which remains healthy at 55% and expected to improve as volumes recover.
Finally, slide 27, before I hand the floor over to Paolo for his concluding remarks. In terms of cash generation profile, as I said earlier, we are really top of the list in terms of cash flow generation, at least in Europe, with EUR 800 million of operating cash flow. This operating cash flow basically starts a virtuous circle, allowing us to, A, deleverage quickly, B, invest more in our IT platform and development of our business, and potentially even in M&A.
This allows us to unlock further synergies, which in turn, again, feeds into the cash flow generation. Overall, we have an 80% plus cash conversion, which is similar to f ast improved, if you want, by the synergies which we expect to generate, as I was mentioning earlier, with a deleveraging profile which would take us to below three times leverage at closing and to around two times, which was our medium-term target at the time of IPO one year after closing. Having said that, I'll hand the floor back to Paolo for his concluding remarks.
Thank you, Bernardo. So let me just go towards the end of our presentation and then immediately into Q&A. Page 29, this is a new key step in the journey of our company and, most importantly, in the value creation journey of our company for our shareholders. In 2016, this was a company with EUR 200 million EBITDA. Over time, through divestment, corporate separation, and M&A, and organic growth, this company will become a EUR 1 billion company, EBITDA company. But most importantly, this will become a much stronger company.
On page 30, we just reiterate the seven key pillars of why we believe this company will be even stronger. National champion in the Italian payment market with leading scale and positioning in Europe as well. Full portfolio solutions and capabilities across the payment ecosystem, the payment rails, and value chain. Number three, a fully integrated end-to-end technology powerhouse. Number four, long-lasting relationship with a broad universe of loyal long-term clients. Number five, significant value creation from highly visible synergies and low execution risk. Number six, superior profitability and cash generation at very large scale. And number seven, strong positioning to capture the multiple growth opportunities in our sector, organic and inorganic, that you see again highlighted in page 31.
So, to cut a long story short, as I've said at the very first page of this presentation, we really believe this powerful combination will create a lot of value for our shareholders, both from the financial standpoint and from the strategic standpoint, creating a more resilient and, most importantly, a better-positioned company to capture the opportunities that we have in front of us. I would stop here, and I would open the Q&A session.
Excuse me. This is the conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press the star and one on their touch-tone telephone. To remove yourself from the question queue, please press the star and two. Please pick up the receiver when asking questions. Anyone who has a question may press the star and one at this time. The first question is from Josh Levin with Autonomous. Please go ahead.
Hi, good morning. I have two questions. The first, can you talk about the regulatory approvals? Worldline is about to close Ingenico, and it doesn't have nearly the country market share you do, but it has to divest a few assets. Should we assume there will be some divestments? And the second, you've mentioned several times that you're interested in international expansion. As you think about potential competitors for banking assets in Europe, whether that's Worldline or Nets or maybe some of the U.S. companies, what do you think will be Nexi's competitive advantage when it comes time to going to the negotiating table for those assets? Thank you.
Thank you, Josh. Well, let's start with the regulatory approvals. That is obviously a very important point. We will have to go through several approvals: Bank of Italy, I think ECB, I think Italian government, but most importantly, DG Comp and Antitrust Authorities more in general. Here, you have the real story only when you are in front of them because, as you know, you cannot ask for opinions before you get there. Clearly, we have done all the homework that we could do on this topic. I think there are two key elements that we have to bring in mind. First of all, this market is not one market. We talk about digital payments, but as you know, there are many, many vertical different markets, and therefore this potential deal would be basically split across these many, many markets.
By the way, you have different levels of the valuation that you can cover for each of these category markets. Second, for most of these markets, the view that we have is that these markets are or are becoming more and more pan-European. I think the competitive dynamics that we are all observing are very clear in this direction. Therefore, when you compare this situation with the one that you were mentioning, I don't believe there is a like-for-like comparison because in that specific case, I understand there was very, very high market share in a very specific market that was considered to be still more local. Again, we are looking forward to work with the authorities and understand, present obviously our case, understand their thoughts, and add them throughout the process. I'm sure we will have a very intense and productive cooperation.
On the second point, to be honest with you, it's very difficult when it comes to M&A to say what are your competitive levers. I think this is a company that has the strength that we have highlighted. I think some of the companies that you mentioned or you made reference to are in the same space. I think when it comes to banking assets, that is, as you mentioned it, I think this is a company that has a long history, both as Nexi and as SIA, of long-term partnerships with banks. I think we understand where their challenges are, where the opportunities are, and we have a true partnership mindset when we think about working with them, working with them. I believe this is clearly a key asset. And then, furthermore, as we said, scale in this case is an asset per se.
Thank you.
The next question is from James Goodman with Barclays. Please go ahead.
Good morning. Thank you. Congratulations on the transaction. Three quick questions from me, please. The first is just around the strategic plan that SIA previously brought out, I think, for 2021, which received quite a lot of press at the time. I know that had things like M&A in it, but I just wondered if you could, in that context, maybe comment on the underlying growth of the SIA asset and how that compares to Nexi. The second question, could you please talk about the importance of UniCredit to SIA, where we are in terms of level of revenue exposure and what the nature of the long-term renewal that we recently read about is as well?
And then just finally, and I suspect the answer to this is no, but there seem a couple of specific assets within perhaps the capital market and network solutions division that sit a little bit outside of payments as a core competency. Is there any sort of portfolio rationalization or consideration that you'd make potentially post closing the transaction? Thank you.
Hi, James. Thank you for the three questions. First of all, on SIA, past strategic plan and underlying growth expectations is a bit difficult to comment because clearly, over the next few months, we will work together to create a new strategic plan for the combined entity. If I look at the recent past, and I think their projections were kind of similar to this, this company had a growth profile as far as revenues are concerned, quite similar to the one of Nexi, while as far as EBITDA is concerned, a bit lower than what Nexi is. Obviously, looking forward, I believe that the synergies that we have presented will help the combined entity to have a double-digit EBITDA growth profile for quite some time. As far as the UniCredit relationship is concerned, this is a relationship between UniCredit and SIA.
This is a long-term relationship, a very strong relationship. We understand that this relationship, there is a high-level agreement to extend it for the long term, and instead, the key final contract discussion and agreements are still to be finalized and will be finalized in the near future. For us, obviously, what is important is that this is renewed for the very long term at the right conditions. Last but not least, you have made reference to the capital markets, the network and capital markets division. Here, I think it's important to say that within that division, there really are two different businesses. One, and this is the largest portion of it, has to do with the network side, and this is actually more integrated with payments.
These are the technologies, the networks where, for example, also Nexi products and services fly for our banks, our merchants, the settlement institutions, and so on and so forth. So these are very mission-critical services where security, service level, availability are incredibly important, incredibly important. And therefore, this one is more integrated. And by the way, there are other large players in our industry around the world that offer this type of services. The capital market solution business, instead, is, as you properly say, is a bit separate with limited synergies, if not in terms of infrastructure management capabilities and technology capabilities. It's important to remind ourselves that we're talking about something that has EUR 20-30 million revenues. So in the context of the new group, this would be 1-1.5% of total revenues. And this is a profitable business. This is a very stable business.
I mean, the SIA owns the IP rights of what they do for the clients. This is a mission-critical business. And to be honest with you, is this strategic for digital payments? The answer is probably no. But this is a small business separate from the rest of the business. It doesn't absorb a higher amount of resources or capital expenditure. And it's actually important for Italian banks and for Italian institutions as well. So for the moment, we are very happy to have it there. I don't believe this will be a priority for us given what I've said before. And then in the longer term, we will see. But clearly, this is not something that will be a priority for us.
Thank you. That was very clear.
The next question is from Charles Brennan with Credit Suisse. Please go ahead.
Great. Good morning and congratulations. Three questions from me, if that's possible. Firstly, can you just talk about the proportion of e-commerce within the combined business? I think you said that e-commerce was 6% of volumes in August for Nexi. What does that look like for the combined group? Secondly, on the synergies, we will all have growth and margin expansion in our Nexi numbers. Can you just confirm that the synergies that you're talking to are all incremental to the existing expansion that we would have in our Nexi forecasts? And if that's the case, can you give us a sense of what standalone SIA EBITDA would look like through 2020 and 2021 so we can start to build some forward-looking proformas? And then lastly, I think you said you were comfortable that the combined group would deliver double-digit EBITDA growth for some time.
But can you talk about what you think the combined revenue growth outlook will be? Obviously, Nexi had 5%-7% growth ambitions. I think since that IPO target, you've been talking more optimistically about digitization. That implies some upside to 5%-7%. But on the other hand, I think on an organic basis, SIA has been growing slower than Nexi. That's obviously a dilutive impact. So where do you see the combined growth prospects at the revenue line? Thank you.
Hi, Charles. And thank you for the actually four questions, not three. On e-commerce, I mean, let's be clear. I mean, we are not doing this to strengthen our e-commerce capabilities. At the end of the day, SIA is where we are in terms of these types of capabilities. This deal brings many other benefits, as I've highlighted before, many, many other benefits. But as far as e-commerce is concerned, it doesn't really change materially our position. Therefore, you should not assume that the combined entity will have a much different profile as far as percentage on revenues coming from e-commerce. Clearly, the combination of the capabilities will allow us to push further in our investments in competence and in technology when it comes to e-commerce, but also to multi-channel capabilities. Where actually, instead, SIA is pretty strong, in particular with corporate customers.
They have very strong integrated collection capabilities across not only channels, but also payment rails, which we believe is really important for the future. This is one of the reasons why they are so strong for corporate, public administration, and so on. On the second point around synergies, you are obviously right. The synergies that we have mentioned are actually on top of our own plans as far as both CapEx, OpEx, and revenues as well. So we're not double-counting. In our plan, out of in particular, our technology transformation plan, we were already embedding certain benefits. Here, we're not double-counting, as much as obviously, we're not double-counting the insourcing of certain activities that now we are buying from SIA that obviously will become intercompany.
So we did do everything we could to make sure that the value is on top of what Nexi would have done without this initiative. Let me cover the fourth question, and then I'll leave it to Bernardo on the 2021 SIA outlook. As far as the combined entity revenue outlook, I think here it's really important to remind all of us that today, our guidance is on hold given the overall COVID situation. And you're right. We always said that our ambition was to grow our revenues from mid to high single digits. We don't have a guidance, but this is, in our mind, remaining the long-term, medium-long-term outlook for what we do. By the way, this is quite similar to the recent performance of SIA and not far from what they had in their standalone plans that we were commenting before.
But again, as I said, we will be developing a joint plan that obviously we'll have to take into account also the current situation with COVID and the outlook with COVID and many other things. Let me hand it over to Bernardo for your third question.
I'd pick up from where you left, Paolo. I mean, obviously, COVID has impacted the projections SIA had before COVID and to which I think James had referred to earlier with regards to their strategic plan. Just let me start with a couple of characteristics which I think are useful to bear in mind when thinking of SIA financials and projecting them. SIA has a revenue mix which is more skewed to being a processor, essentially more skewed to transaction numbers rather than values. This has served them well in the COVID months in terms of their revenues have suffered less than what Nexi's revenues have suffered. They also have an interesting mix of installed base, as we call it, and volume-driven. But their volume-driven was less impacted by COVID because it's more reliant on transfer, on just in general, clearing processes, which were less impacted.
And, in terms of the card-based payments, their revenues are more generated by number of transactions rather than value of transactions. Conversely, their cost base suffered more than ours did during the course of COVID because it's a greater mix of, or higher level of fixed costs compared to variable costs. Now, the projections really depend on where you think volumes are going to go. We believe volumes will have already started to recover and will continue to recover going forward. So SIA will perform, in our view, similarly to what it has done in the past. Historically, revenues have grown similar to where Nexi has been, as Paolo was mentioning earlier. So around the 6%-7% growth on an annual basis.
Whereas EBITDA has grown slightly less than where Nexi has grown, double-digit, but less than the 13%-16% which would be in our previous guidance. Now, we expect with volumes to recover, that performance to pick up again going forward. With the benefit, I would say that blending SIA with Nexi will give us, in the case of rising volume, greater exposure to margin expansion, also thanks to the synergies which we see as highly deliverable.
Just for simplicity, it obviously sounds like because of COVID, 2020 is a down year versus 2019 for SIA. For simplicity, do we assume that 2021 gets back to the 2019 level, or is there a better way of thinking about it?
I think I'd qualify that down in the sense of EBITDA, possibly. In terms of revenue, we actually are more optimistic given what I was mentioning in terms of their revenue mix. In terms of the first half numbers, their revenues were almost flat, whereas we were down 6%. So for the full year, in terms of revenues, they will perform better than Nexi. And in terms of EBITDA, we will see.
Okay. Thank you.
The next question is from Mohammed Moawalla with Goldman Sachs. Please go ahead.
Great. Good morning, Paolo, Bernardo. Congratulations on the deal. I had a couple of questions as well. First of all, I understand that you have an outsourcing agreement on the processing with Worldline. Can you just clarify with us the assumptions in your strategies around that? My understanding is that that contract expires at the end of 2021. And I think as of 2018, you were paying them roughly EUR 90 million or so to outsource the processing. But I know you've built your own processing capabilities over time, and that figure has come down. So in the sort of EUR 100 million of synergies, could you give us a sense of how much exactly you're baked in around sort of Worldline? And then second question is just around kind of future M&A.
The kind of the combined companies' leverage will be sort of roughly two times, but you've historically run Nexi standalone at much higher rates. What is the kind of level of comfort on leverage, and how do you see the timing of sort of future M&A? And is that likely to be building more scale in some of the non-Italian markets that SIA already has, or would you look at sort of completely new geographies? Thank you.
Good morning, Mohammed, and thank you for the two questions. As far as the processing with Worldline is concerned, obviously, this is a part of one of the sources of the cost synergies that Bernardo was describing more in detail, in particular on the technology side. We already had our own plan to, over time, insource more and more. We discussed it in the past that we have already done some of it on acquiring. We are actually starting to do it very soon, while in other areas, the plans were a bit more forward-looking. Clearly, this combination allows us to accelerate many of these plans, and by the way, in some cases, we have also put certain decisions on hold given the possibility of this deal to happen.
We will not necessarily insource everything because maybe there are certain legacy services where it doesn't make sense, and we have a good relationship with Worldline. But I think in general, you should think at the group, as I said before, that it will be much more in-house. We'll have much more in-house control of the delivery. And by the way, this is important not just in terms of cost, but also in terms of innovation agility and ability to deliver complex projects to our partner banks or in general to institutions that we work for. Now, when it comes to future M&A and leverage, let me split the question in two, if I may, maybe also anticipating some other questions that some of your colleagues may have in mind. Future M&A, listen, I think you have in mind international in particular.
Listen, I think it's impossible to have an M&A plan of any kind. You can have an organic plan because that's under your control, and you invest, you take action, you obtain results, and you move on, and so on and so forth. When it comes to M&A, it's basically impossible to have a plan, but it's important to have basic principles. And basically, we have three themes in our mind. Number one, this company will be much more international five years from now, probably three years from now. That's obvious given what is happening in Europe and what is happening around the world. Number two, we'll be looking at the individual opportunities having in mind one thing that is obviously strategic fit and strategic value, but most importantly, value creation for our shareholders.
In particular, Cash EPS equation will remain the key element that will be remaining focused on. Last but not least, that is the third theme or principle, if you wish. We will have to be pragmatic because at the end of the day, you cannot cherry-pick which companies you would like to do something with and make it happen because it takes two to tango. Therefore, we will simply look at the opportunities when they become available. Obviously, we can have our wish list, but we will have to be pragmatic as well and look at the opportunities when they become available. Coming to leverage in this context, as Bernardo has explained very well, I mean, this combination will bring us back to below 3.5 IPO level very soon.
That, by the way, was in any case in our plans before COVID, and we will get there very soon after COVID in any case. We understand that these two companies have similar leverage today, and therefore, the benefit of the faster the leverage is coming mainly from the synergies, but honestly, I mean, and clearly, this will give us flexibility to do further M&A on smaller deals, and by the way, it's not just a matter of the leverage. It's also a matter of cash flow generation, the size of the cash flow generation, and we said that this company would be able to generate EUR 800 million operating cash flow per year. Said that, again, let me put and in general, I mean, as we said in the past, we feel comfortable to stay or to move up to the IPO level that was 3.5 times.
Now we are higher than that because of COVID, not because of the M&A we have done. But in general, we are comfortable if it's needed to go back to these type of levels, more or less, but having in mind always the leveraging pattern towards the 2-2.5 times, as we said, at IPO. Said that our approach is very simple. I mean, we don't start from there. We start from the opportunity. Now, if the opportunity that is available creates value for our shareholders, then we will always look at what is the best way to make it happen from the capital structure point of view.
In the past, we used that, and our perception was that it was well received by our investors, for example, in the case of the Intesa book that, I mean, and that capital structure approach was bringing many, many benefits and creating a lot of value for all our shareholders. In this case, this deal is an all-share deal. And going forward, we'll continue to assess what is the best approach to make that opportunity become real depending on what the opportunity is.
Great. If I could squeeze one quick follow-up in, maybe for Bernardo, are there any scope on interest charges and scope to refinance any of the SIA debt and any sort of tax rate synergies you see as well in your accretion assumptions?
Mo, there are assumptions we made, I think, reasonable, borderline conservative with regards to the debt profile of the combined group and our ability to refinance at better terms. By the way, let's say there are benefits which will be automatic based on the leverage and the deleveraging profile which don't require refinancing itself. So some of them will come automatically. Others will come, I think, if we are able to refinance better than we currently are at. And so yes, the short answer is yes. I think we highlighted how we expect approximately 50 basis points improvement in the combined cost of funding going forward, and that is built into our accretion numbers. Whereas there's no benefit from a tax perspective given that we don't believe there are any tax optimization opportunities, I would say. In general, we have a very simple tax structure and so does SIA.
Great. Thank you very much, Paul.
The next question is from Stéphane Houry with ODDO BHF. Please go ahead.
Yes, hello. Good morning. Thank you for taking your question and congratulations for the deal. I have two questions, actually. The first one is on the EBITDA margin potential because you've been talking a lot about the fixed cost proportion that is increasing. So the first question would be to understand if the 55% is a kind of target for a floor or if you can go above in your view and how much above. And the second question is about the platform rationalization that you've been talking about. Can you take us through the number of platforms that you have together with SIA and how many platforms you think you have to keep in the future? Thank you.
Good morning, Stéphane. And thank you for the two questions. Listen, on EBITDA margin, I think it's important to go back to how this 55% that you're mentioning is created somehow. You know that as a company, we have a fairly high EBITDA margin, and I would say also growing. Given our previous guidance that is currently on hold, you would have expected a further growth. As we always said, you have to be very careful. We have to be very careful when you compare that EBITDA margin with the one of the other players of an industry because given our business structure and the way we account for revenues, this EBITDA margin is particularly high also for technical reasons.
When you compare it like for like with other players in the industry, it is probably a 10%-15% lower than that if you would account it on more gross revenues. In our case, it's really net net. The EBITDA margin of SIA, the starting point in terms of EBITDA margin of SIA is 38%, is more similar to the industry averages, industry standards of companies with a good scale, and the 55% is simply the combination of the two plus the impact of the synergies. Do we believe in the long run, well and therefore, as you can imagine, we remain affected by the same comments that I made around the EBITDA margin of Nexi. Therefore, if you compare it with the one of other industry players on a like-for-like basis, this is probably more anywhere around, we'll say, 45-ish type of thing.
Don't take precise numbers, but I'm trying to make sure that I give you the sense of the underlying themes. Do we believe there is more? We think so. We think so because, as Bernardo said, this will create further operating leverage that is not necessarily already into these numbers long term. Said that, I mean, our focus will not only be in capturing further efficiency operating leverage opportunities, but actually in finding all possible ways to grow revenues. So, as we said in the past, looking beyond the three years and therefore in the longer and longer term, we will do whatever we can to actually drive a double-digit EBITDA margin more and more through revenues rather than through EBITDA margin expansion. As far as platform rationalization is concerned, I mean, this is a very complex and, I would say, long conversation.
As you can imagine, in order to assess the synergies, we have done together with the technology team of SIA some, I would say, quite thorough analysis of what we have, what they have with a longer-term view, and therefore looking at the plans of the two companies as well. I would say it's impossible to count platforms because each of us has a different definition for what a platform is. I think in general, if you go back to some of the themes that we touched upon at IPO, this company will over time integrate on one acquiring platform with one omnichannel and e-commerce gateway, being able to serve cross-border, cross-channel, cross-scheme as well. As far as issuing is concerned, this company will clearly over time have one issuing platform. You have to take into account that most of our current issuing is already processed on SIA platform.
We will have clearly a national debit platform. This is very strategic for our banks. It's very strategic for the system. And then you will have clearing platforms. So it's a bit difficult, but clearly in our plans, integrating over time on individual platforms is one of the themes. To be clear, and I really want to somehow avoid to be misunderstood, I think moving on single platform is a kind of a dream of everybody in the industry, of every technology director, every CEO, and so on and so forth. But actually, the reality is always a bit different because each of these companies is coming from different backgrounds, serving different banks. And by the way, some of these companies are also coming from a lot of M&A.
And therefore, I think moving towards single platform is clearly an ambition and a direction, but getting there is a completely different story because, as you know, migrations, integration, and so on and so forth, sometimes are expensive and require a long time. Obviously, in the synergies that Bernardo has explained, we also took into account the cost of integrating these platforms, the one-off cost of integrating these platforms. So there is consensus in our numbers, and over time, you will see us moving more and more in that direction.
Okay. Thank you very much.
The next question is from Adithya Metuku with Bank of America. Please go ahead.
Yeah. Good morning, guys. So congratulations from my side as well. Firstly, two questions. Firstly, just on the consolidation in the space, you're saying this company will be a lot more international in three to five years' time. So I just wondered, how long will you need for integrating this transaction? How long will it be before you'll be able to look at other opportunities in the industry? If you could give us some puts and takes around that. And then I just had a quick clarification on one of the previous answers around insourcing some of the services quicker than you were previously anticipating because of the transaction. Is this already priced in into your synergies, etc., or could this drive some upside as you execute on the insourcing? Thank you.
Good morning, Adithya, so how busy we will be in making this happen and doing integration and what does it mean in terms of further opportunities? Listen, I go back to what I said before. I think when you look at the M&A side of what you do, you cannot really plan things exactly in the same order and timing and pacing that you would like to, so the reality is that we will be somehow obliged to look at opportunities when they become available, and when they become available, if they create strategic and economic value for our shareholders, then we will assess our ability to execute them or alternatively how we can phase the execution in such a way to make it compatible with everything else we are doing.
I think here, in the case of what we are doing here, you should look at this as a situation where basically 100% of the cost synergies. So out of the EUR 150 million, I would say at least sorry, and most of the revenue synergies, so out of the EUR 150 million, a good 140 probably are actually in Italy. And therefore, when you think in terms of international opportunities, you may think in terms of how you can parallelize things because clearly the integration plan, as you understood from the phasing of synergies, is something that will take time. I mean, certain things will happen fast given this, and you can read it in the numbers we gave you. We said 40%-50% phasing by 2022, but then run rate is probably another three years down the road. So 100% is going to be five years from now.
Can we wait and let other opportunities go for five years? Obviously not. So the principles will be the ones that I mentioned before answering to one of the previous questions, and we will assess if and when we get there how we can run in parallel the different programs. Again, keep in mind that the vast majority of the work that will be done with SIA is actually in Italy.
On.
Sorry, you also had a second point on insourcing quicker. Well, yes. I mean, let me put it this way. As far as acquiring is concerned, our base plan remains the base plan, while on issuing, besides certain elements of it, we had not yet crafted a detailed plan. We were having a tender, and actually, what is happening now with this deal will allow us to do it quicker.
Understood. Thank you.
Obviously, it's into the numbers.
The next question is from Paul Kratz with Jefferies. Please go ahead.
Hi, good morning, everyone. So a couple of questions on my end. When I think of SIA's footprint and processing and I guess your business on the issuing side, your business in issuing is to a large extent premised on taking volumes from the domestic scheme. So I was kind of wondering, how do you guys see that business on a go-forward basis and maybe reconciling? On the one hand, your business taking share from the domestic scheme through your international cards and, I guess, potentially declining volumes on the processing side. The other question that I had as well was on the one-off CapEx savings, if you could maybe provide a little bit more granularity as to where those one-off savings are.
Then finally, just a purely technical one, on that one trillion of issuing and acquiring volumes, could you give us a split between the two different parts of the businesses?
So let me take the first one, and I'll let Bernardo cover the second and the third.
Listen, we always said that basically we had two, well, a broader objective was to gain more space in debit. And clearly, international debit was for us a priority. I think the combined entity will be able to cover the entire debit footprint. And this is very important because also with our support, the banks are trying to relaunch the national debit scheme. And by the way, there is a tender ongoing to create the next-generation platform for that national debit scheme. And we are participating on this as well as SIA is participating. Furthermore, you hear about pan-European national debit schemes being discussed. So I think there is a lot of movement here. So we believe that the combined entity will be best positioned to hedge on the risks and capture the opportunities.
And by the way, I think there will be to a great benefit for the banks and in general the overall system. There are two other things that you need to take into account because they are becoming more and more visible. The first one is that, interestingly enough, and this is very visible on the back of the dynamics that are driven by COVID, you see that some of the extra volumes are really coming from debit and from people that were not used or cannot have access to credit cards. And therefore, strengthening our position on debit will expose us even more to the structural growth of volumes in our country and we believe also beyond our country.
Second, I think in general, especially thanks to the acquisition of the Intesa book and especially on the acquiring side, we are becoming more and more neutral to international debit versus national debit. So the way we look at it is actually further, if you like, resilience and actually further opportunities to grow in the overall debit space. As far as your second question on one-off CapEx, I don't know, Bernardo, if you want to comment.
Yeah. It's essentially primarily, I would say, coming from the Nexi side, from our IT strategy and primarily from three areas, I would say, which are essentially our issuing platform. We were expecting to build an issuing platform from scratch. We're in the middle of an RFP process, and that is clearly being put on hold. And now SIA will be the target IT platform for a large group. The same goes for national debit. That's the other key source of one-off saving and investment from Nexi. And then there's a bunch of other things we're going to do, which effectively replicate existing technology and platforms at the SIA level, which is more granular. But the bulk of it comes from issuing and national debit insourcing, which we were expecting to do.
With regards to the volumes, now the volumes you were asking, the trillion of acquiring and issuing transactions, on the Nexi side, we have full visibility at this stage. I can remind you we had EUR 260 billion of acquiring volumes and EUR 210 billion of issuing volumes. On the SIA side, I only have the aggregate number, which is EUR 580 billion in total. I think for them, it really is less relevant than for us, as I was saying, because they only charge on a per-transaction basis, and it's pretty much the same. So that is the reason why we don't really focus on that. It's more the number than the transactions.
Okay. That was very clear. Thank you.
The next question is from Gianmarco Bonacina with Equita. Please go ahead.
Yes. Good morning. A few quick questions. On page 24, you are showing that the leverage of SIA 3.6, which I calculate correctly, is EUR 1 billion of debt versus the EUR 800 million at the end of last year. So if you can explain why the debt has increased apparently by EUR 200 million this year? The other question is to better calculate the EPS accretion. I wanted to understand if you are adjusting the EUR 95 million net profit from SIA in 2019 because I understand they have a lot of PPA because of the acquisition of First Data and the UniCredit asset? And the last one, in terms of the antitrust approval, I was wondering if you can explain your point of view in terms of market share? So you think that basically the combination is not changing the market share because it's more a vertical integration?
So that's the point to basically address the Antitrust. Thank you.
Ciao, Gianmarco. Buongiorno. So let me start addressing your third question and then hand over to Bernardo for the first two. Here, as I said, you really need to look at it market by market, and there are many markets that are somehow within this deal. And when you look at it from the granular standpoint, in many of these markets, there is no real material change of market share. To give you an example, today we're not a processor. Or, for example, SIA is not really a direct acquirer. And therefore, you really need to look at it from that standpoint because for the competition authorities, what matters is really the change of market share coming out from the combination in the vertical-specific market. Let me hand over to Bernardo.
Yeah. So the question on that debt, EUR 800 million, which is approximately the existing SIA net debt, increases to EUR 1 billion in SIA projections. This has to do, I think, with their overall renegotiation with UniCredit and with other operating expenses they may be incurring during the course of the next few months to closing. So this is a projection we have at closing of what their net debt position will be. The second question you had was with regard to net income. We calculate EPS accretion on a cash net income basis. For us, cash net income is effectively net income adjusted for D&A. So you should add back amortization and also the PPA, I guess, amortization again, depreciation amortization for both the customer contracts on the Nexi side and the IT amortization, and the same for SIA.
Thank you.
The next question is from Alexandre Faure with BNP Paribas Exane . Please go ahead.
Hi. Good morning. Thanks for letting me on. I've got a couple of questions. One is on your production costs, which will most likely come down quite a bit, especially on PagoBancomat . I was just wondering if in your early discussions with some of your partner banks, they would expect you to pass on a big chunk of that in price reduction. So what sort of assumptions have you made around how much of those cost benefits you'll be able to retain? That'd be my first question. Second question is on SIA's exposure to Eastern Europe and Greece. How do you look at these assets? Would you view this as a combination of subscaled operations on a country-by-country basis, or is it quite well integrated already within SIA?
Would you like to double down on these regions to gain scale, or perhaps when you talk about M&A in Europe, we should think of larger countries that actually would come with big volumes from day one? And finally, attached to that, I think, Paolo, you touched on the EPI project. Do you reckon this could make small European countries more attractive in the context of consolidation in Europe? Thank you very much.
Good morning, Alexandre. So, on production costs and cost, in general, listen, I mean, this is an industry where prices are going down. Therefore, we always, in one way or another, give back to our customers a part of the efficiency gains. It's normal, and I think it will continue to happen. I don't believe it makes sense to make very specific assumptions here, but we expect this to continue, and somehow, it was already in the standalone plans of the two companies a little bit across the board. On SIA exposure to Eastern Europe and so on and so forth, listen, I think this is important. I mean, the exposure of SIA outside of Italy was not the key driver or the number one theme for us to look into this, but it's also, at the same time, a nice platform from where to develop.
As I said before, the way we look at the opportunities is actually threefold in international. Number one, in the markets where we're already present, and honestly, we need to do a more specific assessment here. Do we have opportunities, as you said, to double down? And I will not call it double down, but I would say increase scale and therefore make it even more relevant, sustainable, profitable. And when you think about this, the way you should, what you should have in mind is that when you look at all these markets, actually, the one that has the highest concentration of revenue is actually, I think, Greece. Would I double down where maybe you are serving a small local bank? Honestly, not necessarily, but it depends on the attractiveness of the country. It depends on many other things, on the opportunities, and so on and so forth.
But we said, when we think about international, three lines of thinking. Number one, creating further scale and profitability and growth opportunities where we are. Number two, considering given the nature of our two companies and how normal it is to partner with banks and to try and help them in all possible ways, and so on and so forth, clearly, we know that in Europe, many banking assets sorry, many payment assets are still owned by the banks. We also know that over time, this may change. And therefore, clearly, this is a second theme. And then there is a broader theme of, in general, pan-European consolidation. I think the order is not necessarily this one, but as I said before, we need to be able to consider the opportunities when they come.
Finally, EPI, listen, I think EPI, I mean, this is an initiative that we're observing with a lot of attention because, in general, whatever stimulates further digital payments in Europe is positive. I think, at the same time, this is an initiative that is still working hard to define a few key elements: customer benefits, benefits for the merchants, the consumers, the banks, economics, level of investments needed, and how these may evolve in the context of countries that have stronger national schemes and national debit schemes such as Italy. So I think this is an initiative that, on the one side, we like. On the other side, we follow, but still has to be clarified in its practical essence. I think you may be right. I mean, clearly, a unified international debit system, pan-European debit system, may make some smaller countries become more attractive.
I think this is a good point.
Got it. Thank you very much for detailed answer here. Thanks.
The next question is from Hannes Leitner with UBS. Please go ahead.
Yes. Thank you for letting me on, and congrats to the transaction. I got also a couple of questions. The first question is around SIA. Yes, you talked through a couple of the cost initiatives they have undertaken, but given the corona outbreak, should we assume that they had a similar approach than you to protect their EBITDA this year? And then from next year, see there's some growth coming through as well. And then the second question is on your transformative CapEx. Given your contract, your outsourcing contract to SIA, is including acquiring and issuing activities or processing, should we expect that actually by next year, your transformative CapEx will be put on hold? So that would be some accretion, especially on your side.
And then maybe you can talk through also SIA's synergy targets around their acquisitions, especially you mentioned before the First Data, which was only in 2018. So I guess that there are still some of those synergy plans ahead of them. Maybe I should follow up.
Thank you, Hannes. And good morning. And let me hand over to Bernardo. We can cover probably the three questions.
Yep.
Morning. So with regards to the outbreak, I'll go back to the comments I made earlier. SIA performed during COVID better than we did and better than many other payments companies did on the revenues front. As I said, they're pretty much flat in the first half. And clearly, they also tried to enact cost containment and cash flow protection action similar to everyone else did in the sector. So they put the more obvious things like hiring freezes and anything which was really variable on hold. However, their proportion of fixed costs was fixed, and they weren't able to act on them. And in particular, as I was saying during the commentary earlier, they were gearing up in terms of their investment, in terms of capacity to process greater volumes at a level which didn't materialize. So unfortunately, they were penalized by this.
So they did what they could, but not to the extent companies like Nexi were able to on the cost front. But going forward, we expect this trend to be obviously reversed given our expectations that volumes will indeed come back. With regards to transformative CapEx, I think this is a tricky question in the sense that obviously, there is overlap, and I was mentioning it earlier in the question I was asked about the one-off CapEx, which is essentially our transformation CapEx at Nexi in total EUR 65 million. And of course, we will not be duplicating obvious expenses. For instance, it makes sense, and Paolo and I, I think, referred to it, to build our own issuing platform, which is something we had in plan for the coming weeks and months pending approval of this transaction.
But at the same time, as a matter of fact, we need to operate as a standalone entity until antitrust approval has been given and until closing. So we will obviously act, I think, with common sense, but I would say the company still operates as a standalone entity, and therefore, the true benefits from the integration will only come after closing. And we quantified them, I think, in terms of both OpEx and CapEx. With regards to SIA's acquisition strategies, and SIA has grown significantly outside of Italy. In the past, 30% of their business is outside of Italy. And most notably, I think, the transformative deal was the acquisition of the First Data business in Greece and Central Eastern Europe. They're in the process of migrating onto their platform from the First Data platform.
Are pretty much, I would say, halfway there, but COVID has impacted that migration as well. So the truth is there are synergies, but also, unfortunately, dissynergies from having to stay on the existing platform. And this is something we have factored in to the valuation of SIA, the exchange ratio, and our future plans. Just as a reference point, you will see when the SIA first half results are published that they had to take a goodwill charge against these investments in the first half due to this delay in migration. But in general, obviously, there are full run rate benefits coming from the streamlining of their presence abroad and migrating everything onto their processing platform from the ones they acquired.
Thank you for that. Just to follow up, so what I meant is actually that it's possible that you will channel more acquiring processing to SIA as there is a rationale behind it to give it to your merger partner than giving it to other third-party outsourcers. And then the last little follow-up question is around the M&A transaction. You were quite outspoken around any potential opportunity coming up. Should we expect that this is not happening before the closing of this transaction, or you keep your eyes open and you're open even for transactions before that?
I'll answer the processing. Paolo can take the M&A question. But on the processing, just, I think the target platform for the enlarged group is the Nexi core acquiring platform, which we have just recently developed. It stands to reason given that it's next generation and it's just freshly been put together. We're in the process of migrating our volumes onto that platform, so nothing changes. These are things that need to be done, I would say, in sequence and not in parallel. Once the transaction with SIA has closed and we presume we will have migrated all of our volumes at that point on our platform, we can start with their volumes onto our platform. It's the Nexi platform, which will be the core acquiring platform for the enlarged group. Conversely, for issuing, it will be the SIA platform.
Listen, again, on M&A, I think in our industry, you can never sleep. And or if you want to sleep, you have to keep your eyes open. So we always have our eyes open, and we will have to have our eyes open also in the coming days, weeks, months. I think it is as simple as that. I think this is for the benefit of Nexi, standalone, SIA, standalone, and most importantly, for the future combined entity.
Thank you.
The next question is from Rosanna Burcheri with Artemis. Please go ahead.
Hi. I just want to have a clarification. The number that you give in terms of operating cash flow is after what you consider is the ordinary CapEx. Can you just give us a sort of an idea what is the real ongoing CapEx that the new entity will need after the integration has taken place? Just want to have an idea of the capital intensity of the new business, of the new created entity. Thanks.
I think the short answer is on a run rate basis, we expect the enlarged entity to operate between 8% and 10% of revenues. Today, SIA has approximately EUR 100 million of CapEx on EUR 750 million of revenue. So they're operating pretty much and they themselves are going through a transformation process similar to Nexi in terms of investing on new next-generation platforms. And Nexi, I think we have highlighted how this year we were expecting to cut CapEx due to COVID, but we will hover around just like SIA at the 13%-14% of revenues level. Once we factor in the EUR 15 million of run rate CapEx reduction, once we take off the EUR 65 million one-offs, which are transformation CapEx for us, which would have been spread over the 2021, 2023 period, we will go back to the 8%-10% of the combined revenue.
EUR 1.8 billion, approximately EUR 180 million for the combined entity.
Thank you.
And this, by the way, includes the acquisition, the purchase of terminals and ATMs because if you look at it excluding that, we're at 6%-8% of revenues.
The next question is from Massimo Vecchio with UBI Banca. Please go ahead.
Good morning, everybody. Paolo, I have a strategic question on how this merger will change Nexi's position in the e-commerce space, the competitive position, in particular vis-à-vis larger merchants?
Good morning, Massimo. I touched on it a bit earlier. It's very clear that this deal is not intended to strengthen our position in e-commerce. We are doing our investments today, strengthening our capabilities already, and we continue to do so even more with the combined entity because there are very good competencies there as well. I think where instead this will add value is in the broader space of integrated payments and collection for corporates and public administration, where the two companies combined can really provide very strong multi-channel and multi-rail acceptance and payment solutions. So there is a clear benefit in the combination from that angle, not necessarily purely in e-commerce.
Okay. Thank you very much.
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I think we can therefore stop it here, at least for now. This has been, I think, a very intense call, and thank you for many questions you have asked. I'm sure you will have more, and we will have a lot of conversations over the next few hours and days and weeks. Let me just close by thanking everybody. For us, this is a very important first step. We really believe this is a super powerful combination of two companies that are already individually strong, but together, they are super strong. And we are convinced that this really creates superior financial and strategic value for our shareholders.
First of all, by creating the opportunity for double-digit Cash EPS accretion on the financial side, but most importantly, creating a company that will be stronger and in a better position to capture the opportunities that we have in front of us in our sectors. With this, thank you very much for attending, and looking forward to meeting many of you or seeing or talking to many of you in the coming days. Thank you.