On Dec 17, shares of Heartland Payment Systems, Inc. HPY scaled a new 52-week high of $95.16 on its latest merger agreement with Global Payments Inc. GPN.
Heartland’s one-year return of 81.34% was significantly higher than the S&P 500’s return of 3.52%. The return was also much above that of the other industry players like FleetCor Technologies, Inc. FLT and Moneygram International Inc. MGI that recorded returns of 4.28% and -5.66%, respectively.
Heartland’s share price rise reflects favorable market reaction to the insurer’s merger agreement with one of the leading payment technology services provider, which is expected to be in the shareholders’ best interests. Per the deal, Heartland is slated to be acquired by Global Payments for a cash and stock deal worth $4.3 billion. Heartland’s strong direct sales and technology-led distribution channels are expected to complement Global Payment’s existing operations. The combined entity will become one of the largest payments solutions and will cater to around 2.5 million merchants globally. The merged company’s expertise and increased scale are expected to help it generate adjusted net revenues of more than $3 billion and EBITDA of $1 billion, annually.
The deal is expected to close by May 2016. On closing, Global Payment’s shareholders will own 84% stake in the combined entity. The merger has been approved by Board of Directors of both the companies. Nevertheless, Heartland Payments will continue to operate under its brand name and under its business model of fair dealing.
The company’s introduction of secure point-of-sale (POS) software solution, featuring out-of-scope capacity, data security protection and a comprehensive breach warranty to LiquorPOS beverage retailers was also cheered by investors. Moreover, the launch of the first integrated POS system for petroleum retailers, which is compliant with Europay, MasterCard, and Visa (EMV), contributed to the upside in share price.
Heartland currently holds a Zacks Rank #2 (Buy).
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