Wisconsin-based Fiserv and Georgia-based First Data announced today that the boards approved an agreement where Fiserv will buy First Data in a $22 billion all-stock deal. This transaction will create one of the world’s leading payments and financial technology providers.
After the deal closes, Fiserv shareholders will own 57.5% of the combined company. And First Data shareholders will own 42.5%. New Omaha Holdings L.P. (a KKR affiliate), a 39% owner of First Data with 86% of voting rights, will own 16% of the company after the deal closes. This transaction is expected to close during the second half of 2019.
“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information,” said Fiserv president and CEO Jeffery Yabuki in a statement. “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 their customers.”
Fiserv and First Data are going to explore integrated and complementary technology capabilities and solutions to enhance client value and increase market differentiation. After the close of the transaction, the combined company expects to invest an incremental $500 million over five years to create enhanced solutions for clients and accelerate growth. And Fiserv is likely going to refinance the $17 billion of debt that First Data is expected to have at the time of closing.
The combined companies will offer technology capabilities enabling a range of payments and financial services such as account processing, digital banking solutions, card issuer processing, e-commerce, integrated payments, and the Clover cloud-based point-of-sale platform. Across these services, the combined companies are expected to generate approximately $900 million of run-rate savings and at least $500 million of revenue. Plus they are anticipating an annual free cash flow of more than $4 billion in year three.
Fiserv and First Data are going to link their merchant and cash management capabilities and further develop new offerings and provide First Data’s Clover cloud-based platforms for small and medium-sized businesses. The combined companies will create an end-to-end payments platform from issuance to acceptance. And they will enable additional payment methods that give financial institutions, merchants, and billers with the ability to meet their customers’ needs across the multiple ways they want to pay.
“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,” added 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.”
