Fiserv Inc. will acquire First Data Corp. in an all-stock transaction, with the combined company to be known as Fiserv.
Under the terms of the deal, First Data shareholders will receive 0.303 of a Fiserv share for each First Data common share they own, for an equity value of $22 billion. Following the deal's closing, Fiserv shareholders will own 57.5% of the combined company, and First Data shareholders will own 42.5%, on a fully diluted basis.
The combined company expects to invest an incremental $500 million over five years in a program that will focus on a series of new and existing technologies, including improved merchant solutions, digital enablement, advanced risk management, and data-focused solutions.
The transaction is expected to generate at least $500 million of revenue synergies over a five-year period and be accretive to adjusted EPS by more than 20% in the first full year following close. The combined company expects accretion of more than 40% to adjusted EPS at the full cost synergy run-rate.
The combined company expects to generate free cash flow of more than $4 billion in the third year following close, including synergies. Further, it expects to generate approximately $900 million of run-rate cost synergy savings over five years, driven primarily by the elimination of duplicative corporate structures, streamlined technology infrastructure, increased operational efficiencies and process improvements, among other things.
Fiserv plans to refinance the approximately $17 billion of debt that First Data is expected to have at the time of closing, and has entered into a committed bridge financing arrangement in this regard. Fiserv will also suspend share repurchases as of Jan. 16 until the close of the transaction to minimize debt at closing.
The combined company's board will have 10 directors, with six coming from Fiserv's board and four from the board of First Data. Fiserv President and CEO Jeffery Yabuki will be CEO and chairman of the board of the combined company. First Data Chairman and CEO Frank Bisignano will be president and COO in addition to serving as a director of the combined company.
The transaction is subject to customary closing conditions and regulatory approvals, including the approval of shareholders of both companies. The deal is not subject to any financing conditions and is expected to close during the second half of 2019.
New Omaha Holdings LP, an affiliate of Kohlberg Kravis Roberts & Co. LP that controls about 39% of First Data common shares and 86% of its voting rights, has agreed to support the deal. Upon closing, New Omaha Holdings will own about 16% of outstanding common shares of the combined company.
JP Morgan Securities LLC is serving as financial adviser to Fiserv and has provided committed financing. Sullivan & Cromwell LLP is serving as legal adviser to Fiserv. Bank of America Merrill Lynch is serving as financial adviser to First Data, and Simpson Thacher & Bartlett LLP is serving as its legal adviser.
Evercore is serving as financial adviser to the independent directors of First Data's board, and Latham & Watkins LLP is serving as the legal adviser to these independent directors. Kirkland & Ellis LLP is serving as legal adviser to New Omaha Holdings.