Fiserv and First Data agree $22 billion merger

Fiserv and First Data Corporation announced that their boards of directors 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 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.

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 enrolment capabilities can be integrated into Fiserv’s digital banking solutions that serve thousands of financial institutions.
• Enhanced 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.
• Highly 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.

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.
• 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 debt ratings.
• 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 optimisation. These efficiencies will be achieved across the combined organisation while maintaining its commitment to serving clients with excellence and innovation.

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