Global Payments and TSYS have entered into a definitive agreement to execute an all-stock merger. The combined company will be called Global Payments. TSYS shareholders will receive 0.8101 shares in the new company for each share of TSYS common stock they own, which gives TSYS an equity value of approximately $21.50 billion. Global Payments’ shareholders will own 52% of the combined company. TSYS shareholders will own the remaining 48%. The transaction is expected to close in the fourth quarter of this year.

The new Global Payments will have proforma adjusted annual net revenue in the $8.60-billion range, and adjusted annual free cash flow in the $2.50-billion range.

Among U.S. merchant acquirers, Global Payments was 5th largest and TSYS ranked 8th largest in 2018. Global Payments also owns all or part of four merchant acquiring portfolios in Europe. Those ranked 15th, 16th, 45th, and 46th largest in the region. It owns merchant processing contracts in Canada, owns Asia’s 16th largest merchant acquiring portfolio, and maintains a joint venture with CaixaBank in Brazil. TSYS does not acquire outside the U.S.

Global Payments and TSYS combined provide acquiring services to nearly 3.5 million merchants in 32 countries.

TSYS also provides third-party cardholder account processing and card management software licenses to more than 1,300 financial institution clients in more than 80 countries. Those businesses will continue to operate under the TSYS brand name. Approximately two-thirds of TSYS’s annual revenue is generated by those businesses as well as its TSYS Netspend prepaid card business, which operates only in the U.S. Global Payments does not have cardholder account processing, card management software, or prepaid card assets.

The companies have identified $300 million in cost savings over the first three years from redundancies in merchant services, customer service, processing platforms, and corporate overhead.

Last year, TSYS processed 32.3 billion cardholder, merchant, and prepaid card transactions. Global processed more than 17.0 billion merchant transactions.

Jeff Sloan of Global Payments will be CEO of the new company. Troy Woods of TSYS will be Chairman of its Board of Directors.

© Copyright 2019 The Nilson Report