Global Payments to buy Total System Services in fintech deal
The deal is the company's biggest yet and the sector’s third major acquisition in 2019 and comes as payment technology companies consolidate to battle competition from banks
Bengaluru — Payment technology company Global Payments said on Tuesday it will buy peer Total System Services (TSYS) for about $21.5bn in stock, adding scale in a fiercely competitive and fast-growing industry.
The deal, Global Payments’ biggest yet and the sector’s third major acquisition in 2019, comes as payment technology companies consolidate to battle competition from banks making inroads into digital payments and fintech start-ups such as Adyen and Stripe chipping away market share.
The global payment market is set to reach $3-trillion a year in revenue by 2023 as customers increasingly shift to digital payments from cash, according to consulting firm McKinsey.
“We believe the deal marks a shift from [Global Payments’] pursuit of software and differentiated assets into more of a scale play,” Jefferies analysts wrote on a note on Sunday.
“We do not believe a deal would face antitrust considerations nor do we expect another offer although we note that several banks have mentioned renewed focus on payments,” the note read.
After the deal Global Payments will process more than 50-billion transactions annually across the world, making it one of the biggest players in integrated payment technology, it said.
In March, Fidelity National Information Services agreed to buy Worldpay for about $35bn, months after Fiserv announced a $22bn takeover of First Data.
Global Payments itself bought Heartland Payment Systems in a $4.3bn cash-and-stock deal in 2016.
The deal is expected to immediately add to Global Payments’ adjusted profit by mid-single digits in 2020.
The combined company, which will take the name Global Payments and have dual headquarters in Atlanta and Columbus, Georgia, will be led by a 12-member board with six directors from each firm.
Global Payments CEO Jeff Sloan will become the CEO of the merged entity and TSYS CEO Troy Woods will become chair. Global Payments shareholders will own 52% of the combined company, and TSYS shareholders 48% upon closing of the deal.
The deal is expected to close in the fourth quarter of 2019, the company said.
Bank of America Merrill Lynch and JP Morgan Securities are financial advisers to Global Payments, while Wachtell, Lipton, Rosen & Katz is the legal adviser. Goldman Sachs and Greenhill are financial advisers to TSYS and King & Spalding is the legal adviser.