Global Payments Inc. (GPN), a leading worldwide provider of payment technology services, announced today that it has entered into a definitive agreement to acquire Heartland Payment Systems, Inc. (HPY), one of the nation’s largest payment companies.
The transaction significantly expands Global Payments’ U.S. direct small and medium-sized enterprise distribution, merchant base and vertical reach. Heartland’s strengths in direct sales and technology-led distribution are highly 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 substantial technological and operational synergies.
Global Payments expects to accelerate revenue growth by combining Heartland’s deep 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 U.S. and international markets will be augmented by deeper penetration into key Heartland vertical markets including restaurant and education.
The combined company will provide market-leading payments solutions to nearly 2.5 million merchants globally. On a combined basis, the businesses expect to generate in excess of $3.0 billion of adjusted net revenue and $1.0 billion of EBITDA annually. As a result of the transaction, Global Payments anticipates raising its cycle guidance to high-single digit organic adjusted net revenue growth, up to 75 basis points of cash margin expansion annually and mid-teens cash earnings per share growth.
“This partnership with Heartland marks a major milestone for our company, significantly enhancing our direct presence in our largest market and transforming Global Payments into the leading provider of integrated payments technology solutions in the world,” said Jeffrey S. Sloan, Chief Executive Officer of Global Payments. “The combination of strong businesses and cultures in high growth markets will generate exceptional opportunities for our employees, customers, partners and shareholders worldwide.”
“The combination of Global Payments and Heartland will be transformative for the worldwide payments industry,” said Robert O. Carr, Chairman and CEO of Heartland. “Under Jeff’s leadership, I believe the combination of our companies will become the most valuable payments company on the planet. Heartland is excited to team with a truly international company. In the U.S., Heartland will continue to operate under its brand and under its business model of fair dealing--with the Merchant Bill of Rights and the Sales Professional Bill of Rights guiding the way to future growth and innovation.”
Transaction Details
Global Payments will acquire Heartland in a cash-and-stock transaction for $100.00 per share, representing a transaction value of approximately $4.3 billion. Consideration for the transaction will consist of 0.6687 shares of Global Payments stock and $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 percent of the combined entity. Global Payments intends to fund the cash consideration with fully-committed 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 realize at least $50 million in synergies in fiscal 2017 and approximately $125 million of annual run-rate synergies thereafter.
The parties expect the merger to close in Global Payments’ fiscal 2016 fourth quarter, subject to regulatory approval and customary closing conditions, as well as approval by Heartland’s shareholders.
Global Payments’ Second Quarter Fiscal 2016 Summary and Updated Outlook
- Adjusted net revenue grew 5% to $518 million, compared to $494 million in the second quarter of fiscal 2015, or 12% on a constant currency basis.
- Cash earnings per share grew 15% to $0.76, compared to $0.66 in the second quarter of fiscal 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 $722 million, compared to $697 million in the second quarter of fiscal 2015, and GAAP earnings per share were $0.60, compared to $0.55 in the prior year.
Cameron M. Bready, Executive Vice President and Chief Financial Officer of Global Payments, stated, "We are delighted to report strong results for the quarter, particularly in light of continued currency translation headwinds across a number of our markets. Based on these results and our outlook for the remainder of fiscal 2016, we continue to expect adjusted net revenue to range from $2.06 billion to $2.10 billion, or growth of 6% to 8% and 10% to 12% on a constant currency basis over fiscal 2015. We are again raising our expectations for margin expansion and cash earnings per share and now expect annual fiscal 2016 cash operating margin to increase by as much as 60 basis points on a constant currency basis and earnings per share on a cash basis to range from $2.90 to $3.00, reflecting growth of 15% to 19% over fiscal 2015."