Fiserv pays $22bn to acquire PE-backed First Data Corp


Financier Worldwide Magazine

March 2019 Issue

Financial technology provider Fiserv Inc has agreed to acquire payment processor First Data Corp in a $22bn all-stock deal.

The deal, once completed, will create a payment provider giant and could spark a wave of consolidation in the industry in the coming months and years.

Fiserv specialises in financial services technology related to electronic payments and processing. First Data facilitates $2.4 trillion in transactions each year. However, the deal is notable as Fiserv is actually the smaller company of the two with $5.5bn in revenue. First Data generates $8.6bn in sales.

The merger with Fiserv is the latest development in the storied ownership of First Data. In 2007, the company was purchased in a $29bn leveraged buyout (LBO) by private equity giant KKR & Co. In 2015, the company returned to public trading and recorded a net loss of $1.5bn, though it reported earnings of $1.8bn in the latest reported 12-month period. KKR, which currently owns 39 percent of First Data’s common stock, will own 16 percent of the combined company and will retain a board seat upon completion.

Fiserv will assume around $17bn of net debt, which dates back to KKR’s 2007 takeover. The company intends to refinance the debt and has entered into a committed bridge financing arrangement in connection with the transaction.

Under the terms of the merger, First Data shareholders will receive a fixed exchange ratio of 0.303 Fiserv shares for each share of First Data common stock they own. The $22.74 offer represents a premium of 29 percent to First Data’s closing price on the day before the deal was announced. Fiserv shareholders will own 57.5 percent of the combined company, and First Data shareholders will own 42.5 percent. The deal has been approved by the boards of both companies and is expected to close in the second half of 2018, pending regulatory approval and other closing conditions.

“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information,” said Jeffery Yabuki, president and chief executive of Fiserv. “We admire First Data for its excellence in merchant acquiring and global issuing services, and the tremendous progress they have made under Frank’s leadership. We expect this combination to catalyse and support an enhanced value proposition for our collective clients and their customers.”

“I have long admired what Fiserv has achieved over the years, and I look forward to working with the talented associates of both companies as we set a higher standard of innovation and service in the industry,” said Frank Bisignano, chairman and chief executive of First Data. “Our goal at First Data has always been to provide our clients with the most comprehensive suite of innovative, highly-differentiated solutions and services, and I am excited by the significant value that the combination with Fiserv creates for all stakeholders.”

The merger is expected to generate at least $500m of revenue synergies over a five-year period. The combined company is also expected to generate $900m in run-rate cost synergy savings over the same period. Combined earnings per share are expected to rise by more than 20 percent in the first year. The companies expect to invest around $500m in technologies, including next generation merchant solutions, digital enablement, risk management and other services.

Mr Yabuki will become chief executive and chairman of the combined company, while Mr Bisignano will serve as chief operating officer.

The announcement of the deal came on the one-year anniversary of the completion of the last major deal in the fast-growing payments industry – the $10bn merger between rivals Vantiv and Worldpay Inc.

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Richard Summerfield

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