U.S. financial technology provider Fiserv Inc. has signed an agreement to purchase payment processor First Data Corp for a sum of $22 billion, bringing two leading companies together that offer a large chunk of the financial technology that combines links the Main Street and Wall Street.
This latest merger underlines the increasing menace of upstart financial technology companies to a remunerative but vague business long regulated by highly mature companies. The two leading financial rivals offer an array of technology services to merchants, banks, and other firms active in the business of moving money.
They primarily deal in payments, wherein, Fiserv executes credit- and debit- card transactions for banks, while First Data takes care of the merchant part of the equation. Square Inc. and other Fintech firms have coerced into the market recently, attracting potential customers and menacing a major source of revenue.
Fiserv Chief Executive Jeffery Yabuki, said that there are all colossal factors plotting to alter the way people and businesses shift money and information, things that they weren’t aware of yet that will arise.
This deal will bring the private equity company KKR and Co. slightly closer to exiting its investment in First Data, which it made private more than a decade ago, as a part of the biggest leveraged acquisitions ever. The $26 billion deal was for long a burden for the firm, which sold a part of its stake after First Data went public in 2015 but still runs nearly 35% of the company. It is the biggest investment on the part of KKR so far.
Following the announcement, First Data shares climbed by 19% in midday trading Wednesday, while Fisrev’s stock fell approximately 5%.
The companies said on Wednesday that the deal has clinched First Data shares to $22.74, a 29% premium based on the prices over the last some days. KKR will be the owner of 16% of the combined company.
Mr. Yabuki will serve as the chairman and chief executive of the combined company, which will be named Fiserv, whereas, Frank Bisignano, CEO of First Data, will be the president and chief operating officer. Following this deal, Fiserv can sell more of its products to the core merchant customers of First Data and vice-verse.
Outside Milwaukee, Fiserv sells systems to banks, credit unions, and other financial institutions. Some of the retailers using Atlanta-based First Data’s point-of-sale products, such as credit card machines, are Walmark Inc., Valero gas stations, and ride-share company Lyft Inc.