Payments processor Fiserv to buy rival First Data in $39bn deal
Deal comes amid rising M&A activity in payments industry
US payments processor Fiserv has agreed to purchase heavily indebted rival First Data in an all-stock deal that values the company at roughly $39bn, in one of the largest financial services transactions in recent years.
The deal comes as disruption in the payments industry hots up, with a wave of consolidation seen among traditional financial services providers and technology groups that have rattled the space.
First Data stockholders will receive 0.303 shares of Fiserv for each share of First Data they currently hold, worth roughly $22.74 based on the close of trading on Tuesday.
The offer represented a premium of nearly 30 per cent to First Data’s closing share price on Tuesday of $17.54, but was nonetheless below a recent high marked last September when First Data shares climbed to $26.62. The share price dropped heavily a month later after the payments processor missed its profits estimates and trimmed its revenue growth targets.
Merger and acquisition activity in payments technology, which includes products such as Apple Pay and back-end infrastructure that enables transactions, has been on the rise as consumers and merchants turn increasingly cashless payment methods.
First Data has lumbered under a multibillion-dollar debt burden since its $28bn takeover by private equity group KKR ahead of the financial crisis. The company struggled with those financial obligations, earning junk ratings from the major credit rating agencies in the US. One person with knowledge of the deal said its roughly $18bn of debts had limited First Data’s ability to invest in its core business, and that the takeover by Fiserv would give the combined group a stronger investment grade-rated balance sheet.
“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information,” said Jeffery Yabuki, the chief executive of Fiserv.
First Data’s Clover, a tablet-based, point-of-sale technology unit used by boutique coffee shops, restaurants and other small businesses, has been one of the biggest drivers of the company’s growth in recent years.
Designed to compete with start-up technologies such as Square, transaction volumes on Clover have climbed to a $70bn annualised rate, the company said, up 45 per cent year over year.
First Data shares climbed 27 per cent in pre-market trading to $22.21, while Fiserv gained just over 1 per cent to reach $76.
JPMorgan Chase and law firm Sullivan & Cromwell Are advised Fiserv. Bank of America and Simpson Thacher & Bartlett provided advice to First Data.