Fiserv Buys First Data for $22B
January 16, 2019
and First Data have unanimously approved a definitive merger agreement
under which Fiserv will acquire First Data in an all-stock transaction.
The transaction unites two premier companies to create one of the
world’s leading payments and financial technology providers, and an
enhanced value proposition for its clients.
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. Following the close of the transaction, Fiserv shareholders will
own 57.5% of the combined company, and First Data shareholders will own
42.5%, on a fully diluted basis. The all-stock transaction is intended
to be tax-free to First Data shareholders.
This highly complementary combination will offer leading technology
capabilities that enable a 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™ cloud-based point-of-sale solution. The combined company
will offer comprehensive distribution channels and have deep expertise
in partnering with financial institutions, merchants and billers of all
sizes, as well as software developers.
“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’s leadership. We expect this combination to catalyze and
support an enhanced value proposition for our collective clients and
“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
First Data Chairman and CEO Frank Bisignano. “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.”
“We expect the combined company to retain our current investment-grade
ratings based on our strong financial profile and excellent free cash
flow. Together, this should provide the basis for continued disciplined
capital allocation, including debt repayment and share repurchase,” said
Yabuki. “We look forward to welcoming First Data’s talented associates
to Fiserv as we drive the global digitization of payments and financial
Compelling Strategic Benefits
Differentiated Financial Services Platform: With an even more extensive
range of end-to-end solutions, the combined company expects to create
additional value for account processing clients and deepen
relationships. Fiserv and
First Data will link their respective merchant and cash management
capabilities, further developing new offerings and providing First
Data’s Clover cloud-based platforms for small and medium-sized
businesses. For example, First Data’s digital merchant account
enrollment capabilities can be integrated into Fiserv’s digital banking
solutions that serve thousands of financial institutions.
Payments Capabilities: The combination creates a differentiated,
end-to-end payments platform from issuance to acceptance. Through an
enhanced focus on innovation, the combined company will enable
additional payment methods that give financial institutions, merchants
and billers the ability to meet their customers’ needs across the
multiple ways they want to pay.
Complementary Products and Distribution Channels: The combined company
will create additional value for
Fiserv and First Data
clients through an expanded universe of solutions. For example,
Fiserv will be uniquely positioned to help financial institution
clients more effectively meet the needs of business and commercial
clients with offerings such as First Data’s Clover platform.
First Data corporate clients will benefit through market-leading
biller solutions from Fiserv.
to Enrich Future Value Proposition:
Fiserv and First Data
will explore integrated, complementary technology capabilities and
solutions to enhance client value and increase market differentiation.
Following the close of the transaction, the combined company expects to
invest an incremental $500 million over five years to
create significantly enhanced solutions for clients and accelerate
growth. The program will focus on a series of new and existing
technologies, including next-generation merchant solutions, digital
enablement, advanced risk management, and data-focused solutions to keep
the combined company at the forefront of evolving client expectations
and innovative payment methods.
Compelling Financial Benefits
Enhanced Revenue Growth Potential: The transaction is expected to
generate at least $500 million of revenue synergies
over a five year period. Incremental revenue growth is expected to
come from a focus on delivering additional client value in areas
such as bank merchant services and Clover, credit processing,
additional biller services and network innovation.
Strong Adjusted Earnings Per Share Accretion: The transaction is
expected to be accretive to adjusted EPS by more than 20 percent in
the first full year following close. The combined company expects
accretion of more than 40 percent to adjusted EPS at the full cost
Significant Cash Flow Generation: The combined company expects to
generate significant free cash flow exceeding $4 billion
in the third year following close, including synergies.
Fiserv intends to deploy its cash flow through the
continuation of its proven and disciplined capital allocation
strategy, and remains committed to retaining its investment grade
Substantial Cost Savings: The combination is expected to generate
approximately $900 million of run-rate cost synergy
savings over five years, driven primarily by the elimination of
duplicative corporate structures, streamlined technology
infrastructure, increased operational efficiencies, process
improvements, and footprint optimization. These efficiencies will be
achieved across the combined organization while maintaining its
commitment to serving clients with excellence and innovation.
Strong Financial Position:
Fiserv intends to refinance the approximately $17
billion of debt that
First Data is expected to have at the time of closing, and has
entered into a committed bridge financing arrangement in connection
with the transaction. Fiserv
anticipates having a capital structure, balance sheet and capital
allocation policy consistent with an investment grade credit
rating. As such, Fiserv
expects to utilize its strong free cash flow to reduce the company’s
debt to adjusted EBITDA ratio to a level generally in line with
Fiserv’s historical performance within 24 months after the
transaction closes. Fiserv
expects to retain its current investment grade ratings of Baa2 and
BBB from Moody’s and S&P, respectively.
Fiserv will also suspend share repurchases as of today until
the close of the transaction to minimize debt at closing.
Governance and Leadership
combined company will be led by an experienced board and leadership team
that leverages the strengths and capabilities of both companies. Upon
closing, the board of the combined company will consist of 10 members,
six of whom will be from the board of Fiserv and four of whom will be
from the board of First Data.
Upon closing, Jeffery Yabuki, current Fiserv President and Chief
Executive Officer, will serve as Chief Executive Officer and Chairman of
the board of directors of the combined company. Frank Bisignano, current
Chairman and Chief Executive Officer of First Data, will assume the role
of President and Chief Operating Officer, and will serve as director of
the board of the combined company. The combined entity will be known as
An affiliate of Kohlberg Kravis Roberts & Co. L.P., New Omaha Holdings
L.P.,which controls approximately 39% of the outstanding First Data
common stock and 86% of the voting rights of First Data, has entered
into a voting agreement in support of the transaction. Upon closing, New
Omaha Holdings will own approximately 16% of the outstanding common
stock of the combined company.
Timing and Approvals
The transaction, which is expected to close during the second half of
2019, is subject to customary closing conditions and regulatory
approvals, including the approval of shareholders of both companies. The
transaction is not subject to any financing conditions.