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Global Payments acquiring Total System Services in $21.5B all-stock deal

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Global Payments acquiring Total System Services in $21.5B all-stock deal

Global Payments Inc. and Total System Services Inc. agreed to combine in an all-stock merger of equals valued at approximately $21.5 billion.

Under the terms of the deal, Total System Services, commonly referred to as TSYS, shareholders will receive 0.8101 of a Global Payments common share for each common share they own. This represents a roughly 20% premium to TSYS' May 23 common stock price.

Global Payments shareholders will own 52% of the combined company and TSYS shareholders will own 48%, on a fully diluted basis, at the closing of the deal. The combined company will be known as Global Payments and will have headquarters in Atlanta and Columbus, Ga.

TSYS Chairman, President and CEO Troy Woods will become chairman of the board, while Global Payments CEO Jeff Sloan will serve as CEO of the combined company and will serve as a board member. Global Payments CFO Cameron Bready will become president and COO of the combined company, and TSYS CFO Paul Todd will be the combined company's CFO.

The combined company's board will have 12 members, with representation to be evenly split between the two companies.

The transaction is expected to close in the fourth quarter and is not subject to any financing conditions.

The combined company is expected to generate around approximately $2.5 billion of adjusted free cash flow, $8.6 billion in annual adjusted net revenue plus network fees, and roughly $3.5 billion in adjusted EBITDA on a pro forma basis for 2019, taking into account run-rate revenue and expense synergies. Global Payments is expected to have a pro forma leverage ratio of roughly 2.5x at the closing of the deal.

The deal is expected to be accretive by mid single digits to adjusted EPS in 2020 and by low double digits thereafter on an operating basis. The deal is expected to result in at least $300 million in annual run-rate cost synergies and at least $100 million in annual run-rate revenue synergies, with the synergies expected to be realized within three years.

Rumors of the impending mega deal were reported May 24, with sources telling CNBC that Global Payments will acquire TSYS for roughly $20 billion. The deal announcement follows other mega deals in the financial technology industry in 2019 such as Fiserv Inc.'s planned $21.79 billion acquisition of First Data Corp. and Fidelity National Information Services Inc.'s planned $36.26 billion acquisition of Worldpay Inc.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC are Global Payments' financial advisers and have provided committed financing, while Wachtell Lipton Rosen & Katz is its legal adviser. Goldman Sachs & Co. LLC and Greenhill & Co. are TSYS' financial advisers, and King & Spalding LLP is its legal adviser.