KKR’s First Data Files for IPO Eight Years After Buyout

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Why KKR's First Data Is Filing for an IPO

First Data Corp. filed for an initial public offering, eight years after KKR & Co. took the payments processor private in what’s become its biggest bet ever.

First Data said it will raise $100 million, a placeholder figure used to calculate fees, according to Monday’s offering prospectus. It plans to use proceeds from the IPO to repay debt.

KKR is seeking to extract a profit from First Data, which struggled during the recession after the private equity firm acquired it in 2007 for $29.8 billion, including debt and fees. KKR financed the leveraged buyout with more than $20 billion of loans and bonds, and the Atlanta-based company cycled through a succession of chief executive officers as its debt load weighed on results.

In 2013, KKR recruited Frank Bisignano from JPMorgan Chase & Co. as CEO, a trusted troubleshooter for the bank’s head Jamie Dimon. The following year, KKR raised an additional $3.5 billion in equity for First Data. The private equity firm kicked in $1.2 billion, of which $700 million came from KKR’s balance sheet, a rare move that ratcheted up its exposure to First Data’s future. KKR’s equity investment rose to $3.9 billion, its largest ever in a company in its 39-year history.

“Yes, the business had its challenges,” Bisignano wrote in a letter attached to the prospectus, citing the debt load, management changes and a restructuring plan based on selling assets. “But I knew that payments was a growth industry, that technology was the great enabler.”

KKR’s co-founder Henry Kravis and executives Scott Nuttall and Tagar Olson represent the buyout firm on First Data’s board.

Acquisition Spree

Bisignano, 55, has led a revival in large part by adding capabilities through acquisitions such as Clover Network Inc., a cloud-based payment software developer; Perka Inc., a digital rewards-program designer; Gyft Inc., a mobile gift-card company; and Transaction Wireless Inc., a digital gift-card distribution platform it bought last week.

“Our vision is to be the industry’s grand collaborator,” Bisignano said.

First Data runs a debit-card network and processes bank-card transactions for banks and merchants. In 2014, it processed more than 2,300 transactions per second, according to the filing. The company also helps small businesses detect fraud and provides data analytics and other services to merchants.

Annual Losses

First Data posted $11.2 billion in 2014 revenue, an increase of 3.2 percent from the previous year. Adjusted earnings before interest, taxes, depreciation and amortization - - a measure of cash flow -- rose 8.7 percent to $2.7 billion, according to the filing. The company hasn’t turned an annual profit since its buyout.

“We have much work to do, and we know First Data has not yet truly arrived,” said Bisignano. “We love the hand that we have –- we have millions of clients, we know how to innovate and collaborate, our leadership bench is deep and being in business with KKR has been great.”

The biggest U.S. IPOs this year by offering size include Tallgrass Energy GP LP, which raised $1.4 billion; Columbia Pipeline Partners LP; Univar Inc. and Fitbit Inc., according to data compiled by Bloomberg.

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