Global Payments to acquire Heartland Payment Systems for USD 4.3 bln

The transaction expands Global Payments’ US direct small and medium-sized enterprise distribution, merchant base and vertical reach. Heartland’s strengths in direct sales and technology-led distribution are complementary to Global Payments’ expertise in 60 vertical markets with 2,000 technology partners. The combination will leverage Global Payments’ scalable, worldwide infrastructure, and drive technological and operational synergies.

Global Payments expects to accelerate revenue growth by combining Heartland’s expertise in technology solutions with its OpenEdge partner integration, network and marketing capabilities to create a distinctive set of solutions and distribution. In addition, Global Payments plans to leverage Heartland’s product and sales capabilities globally through direct distribution in the 29 countries in which Global Payments currently does business.

Opportunities to cross-sell Heartland’s point of sale, payroll, loyalty and gift solutions into Global Payments’ core US and international markets will be increased by penetration into key Heartland vertical markets including restaurant and education.

The combined company will provide payments solutions to nearly 2.5 million merchants globally. On a combined basis, the businesses expect to generate in excess of USD 3 billion of adjusted net revenue and USD 1 billion of EBITDA annually. As a result of the transaction, Global Payments anticipates raising its cycle guidance to digit organic adjusted net revenue growth, up to 75 basis points of cash margin expansion annually and mid-teens cash earnings per share growth.

Global Payments will acquire Heartland in a cash-and-stock transaction for USD 100.00 per share, representing a transaction value of approximately USD 4.3 billion. Consideration for the transaction will consist of 0.6687 shares of Global Payments stock and USD 53.28 for each share of Heartland stock at closing, subject to the terms of the merger agreement. Existing Global Payments’ shareholders will own approximately 84% of the combined entity. Global Payments intends to fund the cash consideration with debt financing. The merger agreement has been unanimously approved by each company’s Board of Directors.

Global Payments believes the transaction will be mid-single digit accretive on a percentage basis to cash earnings per share in fiscal 2017 and double-digit accretive thereafter. Global Payments expects to realise at least USD 50 million in synergies in fiscal 2017 and approximately USD 125 million of annual run-rate synergies thereafter.

The parties expect the merger to close in Global Payments’ fiscal Q4, 2016, subject to regulatory approval and customary closing conditions, as well as approval by Heartland’s shareholders. Global Payments’ Fiscal Q2 2016 Summary and Updated Outlook Adjusted net revenue grew 5% to USD 518 million, compared to USD 494 million in the fiscal Q2 2015, or 12% on a constant currency basis.

Cash earnings per share grew 15% to USD 0.76, compared to USD 0.66 in the fiscal Q2 2015, or 29% on a constant currency basis. Cash operating margins were 29.6%, expanding 60 bps on a constant currency basis year over year. GAAP revenues grew 4% to USD 722 million, compared to USD 697 million in the fiscal Q2 2015, and GAAP earnings per share were USD 0.60, compared to USD 0.55 in 2014.