News
BREAKING: First Data to sell for $29 billion
April 1, 2007
DENVER - First Data Corp. has announced plans to sell its business to Kohlberg Kravis Roberts & Co. The transaction is valued at approximately $29 billion. Morgan Stanley & Co. is serving as sole financial advisor to First Data; Evercore Group LL is serving as financial advisor to the Strategic Review Committee of the First Data board of directors.
According to an April 2 news release, the deal stipulates that each First Data shareholder receive $34 in cash for each share of First Data common stock, 26 percent higher than First Data's closing share price on March 30 of $26.90.
"We are pleased to reach this agreement with one of the world's largest and most successful private equity firms," said Ric Duques, First Data's chairman and chief executive. "We believe that current market conditions present an exceptional opportunity to fulfill our commitment to maximize the value of First Data by delivering an immediate cash premium to our shareholders."
Since its initial public offering in 1992, First Data has grown from $1.2 billion in annual revenue to $10.6 billion, before the spin-off of Western Union and $7.1 billion post spin-off.
"First Data is at the forefront of the worldwide trend toward electronic payments," said KKR member Scott Nuttall. "We believe that through continued investments in its technology, people and customer relationships, First Data will build on its history of innovation and industry leadership."
First Data says it expects to tender for all of its outstanding bonds in conjunction with closing. Under the merger agreement, First Data may solicit proposals from third parties during the next 50 days. In accordance with the agreement, the Board of Directors of First Data, through its Strategic Review Committee and with the assistance of its independent advisors, intends to actively solicit proposals during this period. Ultimately, First Data could vie for a better deal.
That makes the deal even that more intriguing, says Theodore Iacobuzio, managing director and practice leader for Boston-based TowerGroup's payments practice.
"The only entities with the kind of liquidity that a leveraged buyout specialist like KKR can command are very large global financial-services institutions, and very large hardware and software companies," he said. "More than one of them may be interested in First Data as currently constituted. The largest questions gather around the U.S. issuer-side processing business and First Data's extensive global network of acquisitions, joint ventures and alliances. Only time will tell how the latter are dealt with, governed or sold. The former, once the company's crown jewel and now shrinking, could provide more than one network, bank or other payment processor with a commanding position among 'tier two' credit-card issuers."
The sale itself did not come as a surprise, Iacobuzio said.
"The spin-off of Western Union from the larger First Data was an unmistakable signal that the company was finding it difficult to find synergies among its related-though disparate-lines of business."
Dan Schatt, a senior analyst with Boston's Celent LLC, agrees.
"Over the past two years, First Data has been in the unenviable position of releasing its most profitable operation, Western Union, in a spin-off, contending with slowing domestic transaction growth as large card issuers take their operations in-house," he said. "It has been a prime acquisition target for sometime, particularly for large private equity firms attracted to its low growth, yet steady annuity stream."
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