Fiserv to Buy First Data for $22B as Fintech Consolidation Continues

The mega-deals keep on coming. Today, it’s a massive acquisition in financial technology: Fiserv has struck an agreement to acquire First Data in an all-stock transaction valued at $22 billion.

The deal has been approved by both companies’ boards but still needs to be accepted by shareholders and regulators. Assuming it closes as expected later this year, it would combine two big players in financial services and payments processing.

Fiserv (NASDAQ: FISV), a 35-year-old company based in Brookfield, WI, sells products for electronic bill processing, mobile banking, and other financial services to clients including banks, credit unions, investment management firms, and retailers. It employs around 24,000 people worldwide and generated $5.82 billion in revenue last year, according to preliminary results.

New York-based First Data (NYSE: FDC), founded in 1971 in Omaha, NE, provides technologies to secure and process transactions. Its products include Clover, a point-of-sale system used at restaurants and other merchants, which competes with the likes of Square and Toast. First Data has 22,000 employees and generated $8.66 billion in adjusted revenues last year, per preliminary results.

The $22 billion acquisition is one of the largest deals in recent memory, and it may be the largest ever in the fintech sector. In 2017, Vantiv and Worldpay—payments processing companies that compete with Fiserv and First Data—agreed to a $10.4 billion merger. Last year, online payments firm PayPal bought Sweden-based fintech startup iZettle for $2.2 billion. And in 2007, Fiserv paid $4.4 billion in cash to buy e-commerce services firm CheckFree.

Fiserv and First Data will face a difficult task integrating their massive companies, and even if that goes well, there’s no telling whether joining forces will help the legacy fintech firms win against newer rivals such as Square and Stripe. Fiserv and First Data leaders obviously believe the deal gives them the best shot at success in a rapidly evolving industry.

“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information,” Fiserv CEO Jeffery Yabuki said in a prepared statement.

Executives at Fiserv and First Data see some of their products as complementary and think together they can grow their revenues. In addition, the companies plan to invest $500 million in technology and product development over five years, according to a press release.

Of course, like with many mergers, there will be cuts to save money. The companies anticipate $900 million of “cost synergy savings” over five years, which will be achieved by eliminating redundant corporate structures, streamlining technology, finding efficiencies in operations, and seeking “footprint optimization,” according to the press release.

Fiserv’s stock price was down 5 percent Wednesday afternoon to $71.28 per share, while First Data’s had climbed nearly 21 percent to $21.18.

Under the deal terms, First Data shareholders will receive 0.303 Fiserv shares for each First Data share of common stock they own. The price works out to a 29 percent premium to First Data’s closing stock price on Tuesday, the day before the deal was announced.

Fiserv plans to refinance First Data’s $17 billion in debt.

After the deal closes, Fiserv’s Yabuki will become CEO and chairman of the combined company, which will be known as Fiserv. First Data CEO Frank Bisignano will serve as president and chief operating officer of the combined business and will sit on its board.

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