- Stock and cash deal has transaction value of $100 per share
- Combined company expected to generate $3 billion in revenue
Global Payments Inc. agreed to buy smaller rival Heartland Payment Systems Inc. for about $4.3 billion as card-processing companies consolidate and adapt to new technology.
Heartland shareholders will receive 0.6687 share of Global Payments stock and $53.28 for each share of Heartland stock, for a transaction value of $100 a share, the companies said Tuesday in a statement. Heartland climbed 11 percent to $94.33 at 4:50 p.m. in extended trading in New York, while Atlanta-based Global Payments slid 2.3 percent to $69.75.
“The combination of Global Payments and Heartland will be transformative for the worldwide payments industry,” Robert O. Carr, chief executive officer of Princeton, New Jersey-based Heartland, said in the statement. The company said it expects the deal to help boost revenue growth, while cutting costs.
As consumers replace cash and checks with electronic payments including credit cards and mobile phones, companies that process transactions are rushing to consolidate. Established firms are scooping up smaller competitors and merging with companies abroad, repositioning themselves as technology for handling transactions evolves.
Global Payments and Heartland are two of the U.S.’s largest so-called merchant acquirers, or companies that provide technology for helping businesses and government entities process credit and debit transactions. Global Payments had about 2.9 percent of the global transactions processing market in 2014, while Heartland had about 2.1 percent, according to the Nilson Report, an industry trade publication and data service.
The combined company will provide services to about 2.5 million customers globally, and is expected to generate more than $3 billion of adjusted net revenue annually, according to the statement. Global Payments anticipates raising its forecast to “high single-digit” adjusted net revenue growth and “mid-teens” cash earnings growth per share.
The deal, expected to be completed in the fiscal fourth quarter ending May 31, should result in at least $50 million of cost savings in fiscal 2017 and approximately $125 million annually after that, according to the statement.
Global Payments went public in 2001 and has completed at least 20 acquisitions valued at almost $2.8 billion in the past 15 years, according to data compiled by Bloomberg. Heartland would be its largest takeover yet, the data show. The company is interested in buying businesses that can either deliver new technology, extend its reach into new geographic markets or shore up its position in places where it already operates, Chief Financial Officer Cameron Bready said at a Dec. 3 investor conference in New York.
Heartland, which processed its first card transaction in 1997, provides payment services to more than 250,000 business locations in the U.S., and is the sixth-largest processor in the country by transaction volume, according to its website.
Financial Technology Partners advised Heartland on the deal.