US financial services technology company Fiserv has swooped on rival payment and banking technology specialist First Data, agreeing a $22 billion all-stock acquisition to create a fintech powerhouse worth some $39 billion.
“The transaction [will] create one of the world’s leading payments and financial technology providers,” the two said.
The offer represented a premium of nearly 30 percent to First Data’s closing share price on Tuesday of $17.54. It comes as competition in the payments space heats up significantly as startups and tech companies wade into the space.
The deal came the same day as heavily leveraged First Data said it anticipates full-year earnings of $9.49 billion. Fiserv said it will refinance the $17 billion of debt that First Data is expected to have at the time of closing.
Fiserv First Data Acquisition “Unanimously Approved”
The two said the deal, unanimously approved by their respective boards of directors and announced this morning, will allow them to link their respective merchant and cash management capabilities, further develop new offerings and provide First Data’s Clover cloud-based platforms for small and medium-sized businesses.
(The latter has been a bright spot in heavily indebted First Data’s portfolio. A tablet or smartphone-based PoS system it competes with offerings like that of Square and supports transactions worth $70 billion annually).
They expect the merger – after which Fiserv shareholders will own 57.5 percent of the combined company, and First Data shareholders will own 42.5 percent – will generate nearly $1 billion in savings driven by the “elimination of duplicative corporate structures, streamlined technology infrastructure, increased operational efficiencies, process improvements, and footprint optimization.”
The combined company will have deep, broad distribution channels and relationships with both customers and software developers, the two said.
It will offer a sweeping range of payments and financial services, including account processing and digital banking solutions; card issuer processing and network services; e-commerce; integrated payments; and the Clover point-of-sale offering.
(Fiserv, founded in 1984 and based in Wisconsin, has around 12,000 clients globally and provides a wide range of financial services technology solutions. First Data, founded in 1971 and based in Atlanta, provides payment technology and services to more than six million merchants and financial institutions around the world. Its infrastructure underpins more than 2,500 financial transactions per second.)
Fiserv, First Data Merger
“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 Officer 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 [Bisignano]’s leadership. We expect this combination to catalyze and support an enhanced value proposition for our collective clients and their customers.”
First Data Chairman and CEO Frank Bisignano added: “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.”
Under the terms of the agreement, First Data shareholders will receive a fixed exchange ratio of 0.303 Fiserv shares for each share of First Data common stock they own, for an equity value of $22 billion. This represents $22.74 based on closing prices as of January 15, and a premium of 29% to the five-day volume weighted average price as of that date.