Guggenheim Securities analysts Jeff Cantwell and Spencer Kennedy upgraded Global Payments Inc. to "buy" from "neutral" and assigned a $176 price target following the announcement of its planned $21.5 billion acquisition of Total System Services Inc.
The analysts said Global Payments made a "smart strategic decision," as they believe the deal will give it a sizable footprint in the integrated payments market on a pro forma basis, which in turn will enable the company to sustain high revenue and EPS growth rates. They also believe that management's initial estimates on revenue and cost synergy targets will be exceeded, similar to past deals in the payments market.
Global Payments said the deal will yield at least $300 million in annual run-rate cost synergies and at least $100 million in annual run-rate revenue synergies, both of which are expected to be realized within three years.
Cantwell and Kennedy downgraded Total System Services to "neutral," as the company's shares have exceeded their previous price target of $108.