Global Payments has agreed to acquire Total Systems Services (TSYS) for $21.5 billion. The companies announced the deal today. The reports had an immediate effect on the stocks of the two companies. TSYS shares jumped by 17.9% and shares of Global Payments saw a gain of 3.7%.
Is Global Payments going to pay $20 billion for TSYS?
Global Payments is based in Atlanta and is part of the S&P 500 index. In 2017, it had a revenue of $3.98 billion and net income of nearly $500 million. The company, which was founded in 2000, employs 10,000 people around the world.
Its main business involves providing payment processing services to merchants. It allows retailers to accept debit/credit card payments acting as the merchant acquirer. The source of revenue for Global Payments is the 1-2% commission it receives for the credit card transactions. The company provides other services as well, including analytics. The main market for the company is North America, where it generated 75% of its revenue in 2016.
TSYS provides merchants with payment processing services as well. In 2018, TSYS made $4.028 billion in revenue and $577.917 million in net income. The company, that has over 35-year-old history employs 12,820 people.
It has many subsidiaries in the FinTech world including ProPay, NetSpend, and TransFirst. The company has gone through a period of fast growth in the past year. Its stock is currently up 23% year to date, which has brought TSYS’ market capitalisation to $17.6 billion as opposed to $23.3 billion boasted by Global Payments.
“The combination of Global Payments and TSYS establishes the leading pure play payments technology company with unparalleled vertical market and payment software capabilities and e-commerce and omni-channel solutions, operating at scale in fast growing markets globally,” said Jeff Sloan, Chief Executive Officer of Global Payments.
“This transformative partnership accelerates our technology-enabled, software-driven payments strategy and provides exposure into attractive and complementary businesses, while enhancing our financial strength and flexibility.
We could not be more excited about the future as we bring together two industry leaders with strong businesses and cultures that will generate significant opportunities for our employees, customers, partners and shareholders worldwide.”
The consolidation comes as established financial companies seek to compete with new technology players, like Square and PayPal, which offer technology driven services. Last year, VC funding for payments and processing grew to a total $4.4 billion — a 46% increase from a year earlier, according to PitchBook.
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