Mergers & Acquisitions

Global Payments buys TSYS in $21.5bn all-stock deal


Global Payments announced its acquisition of TSYS in a $21.5bn all-stock deal on Tuesday as the consolidation cycle sweeping through the sector continued.

“Look for us to do more technology deals” in the wake of the TSYS purchase, said Jeff Sloan, chief executive of Global Payments, suggesting the deal spree in the payments technology industry may not be over.

The tie-up follows Fiserv’s $39bn deal to buy First Data and Fidelity National Information Services’ (FIS) agreement to buy Worldpay for $43bn, both earlier this year.

Mr Sloan, who will continue as chief executive in the combined company, said payments “has always been a consolidating business — because it is a scale business.” Troy Woods, TSYS chief executive, will take over over as chairman of the board at the new company.

Mr Sloan added: “The reason I think [the consolidation] is accelerating now is that the pace of innovation is accelerating.”

At some point down the road, buying Jack Henry might make sense, as it would make Global a true competitor [to Fidelity National and Fiserv]

Steven Kwok, Keefe Bruyette and Woods

He points to the move towards contactless card payments in the US, the rapid uptake of QR code payments in China, which are a type of barcode, and Apple’s entry into the payments sector as examples of rapid change in the industry.

Like the Fiserv/First data deal before it, Tuesday’s merger combines one company — Atlanta-based Global Payments — whose core business is helping merchants process card, mobile, and online payments with another business — TSYS of Columbus, Georgia — which focuses on helping card issuers and other financial institutions accept and clear payments.

TSYS’ own, smaller merchant business, and Global Payments’ strength in selling transaction software for specific industries, will serve to fill out the offering.

“Combining issuers’ data with merchants’ data, [Global Payments] becomes a kind of mini-Visa or Mastercard,” said Mr Sloan, giving it key advantages in areas such as fraud detection.

Analysts say there is still one missing piece — transaction processing software for banks, which makes up the core of Fiserv’s business. The remaining independent core processing provider is Missouri-based Jack Henry.

“At some point down the road, buying Jack Henry might make sense, as it would make Global a true competitor” to Fidelity National and Fiserv, said Steven Kwok of Keefe Bruyette and Woods. In the meantime, he expects Global Payments to continue to buy smaller, private software companies supporting particular industries.

Mr Sloan said the deal leaves his company with plenty of financial firepower for acquisitions and investment. Given debt of 2.5 times earnings before interest, taxes, depreciation and amortisation and free cash flow of $2.5bn, “we are not constrained”, he said.

Before the TSYS deal, the company had spent $2.3bn since late 2017 acquiring companies specialising in the entertainment, restaurant and healthcare fields. Mr Sloan said he is eyeing the government and real estate industries next.

Shareholders in Georgia-based TSYS will receive 0.81 shares in Global Payments for each of their shares, the equivalent of $124.30 at Global Payments closing price on Friday. That is a 25 per cent premium to TSYS’ closing price on Thursday, before the shares rose when reports that a deal was imminent emerged on Friday.

Shares in TSYS rose 6 per cent on Tuesday morning. Shares in Global Payments fell 2 per cent.

Global Payments’ shareholders will own 52 per cent of the combined company.

The two companies generated a combined $8bn in revenues and network fees, and more than a $1bn in net income, in 2018. The two companies expect the deal to create at least $300m of cost savings and $100m of new revenue, driven by opportunities to cross-sell products to the combined customer base.

Comments (1)

  1. Thank you for sharing excellent informations. Your web site is so cool. I’m impressed by the details that you’ve on this blog. It reveals how nicely you perceive this subject. Bookmarked this website page, will come back for extra articles. You, my friend, ROCK! I found simply the info I already searched all over the place and just could not come across. What an ideal site.

Comment here