FleetCor Technologies Inc., a provider of fuel cards, agreed to acquire Comdata Inc. for $3.45 billion to expand in payments.
FleetCor plans to finance the purchase with about $2.4 billion of new debt and issue about 7.3 million of its shares to Ceridian LLC, which owns Comdata, the Norcross, Georgia-based buyer said yesterday in a statement.
The deal allows FleetCor -- a provider of specialized payment products and services to commercial auto fleets, oil companies and petroleum marketers -- to expand in North America and enter the business of virtual bank-card payments. The acquisition will increase FleetCor’s scale, earnings and diversify its mix of businesses, according to the statement.
“That’s a transformational acquisition for FleetCor,” Wayne Johnson, an analyst at Raymond James Financial Inc. in Atlanta, said in a phone interview. “It expands their domestic business dramatically.”
Shares of FleetCor rose 3.2 percent to $133.61 in extended trading yesterday in New York. The stock had climbed more than 10 percent this year through the close of regular trading.
As consumers globally replace cash and checks with electronic payments, deals among companies that process credit-and debit-card transactions are surging. The first six months saw 125 pending and completed deals in the payments industry, a 76 percent increase from the first half of last year, according to data compiled by Financial Technology Partners LP, a San Francisco-based investment bank. Payments-services companies also are vying to stay ahead of emerging technologies and expand overseas.
“We expect the acquisition to be meaningfully accretive to earnings in fiscal year 2015,” FleetCor Chief Financial Officer Eric Dey said in the statement. “The new credit facility will also provide additional liquidity for future business development activity.”
Comdata will contribute 50 cents to 60 cents to FleetCor’s adjusted net income per share in 2015, according to the statement. FleetCor said it expects the deal to be completed by the end of the year. Barclays Plc advised FleetCor and JPMorgan Chase & Co. and Deutsche Bank AG advised Ceridian.
Comdata issues and processes electronic payments for auto fleets and provides virtual and gift cards. Ceridian is owned by Fidelity National Financial Inc., the largest U.S. title insurer, and funds affiliated with private-equity firm Thomas H. Lee Partners LP.
Facing limits on growth in its main title insurance business, Fidelity National has made bets in other industries. The company’s investments include stakes in Ceridian, auto-parts manufacturer Remy International and casual dining restaurants.
To highlight the value of that portfolio, Fidelity National spun off some of those holdings at the end of June. They’re now in a tracking stock that has a market value of $1.55 billion.