First Data Corporation FDC recently completed the acquisition of one of its largest distribution partners BluePay Holdings, Inc. from its current owners TA Associates and BluePay management.
The announcement of the merger was first made on Oct 20 for $760 million in cash. The acquisition is anticipated to make a modest contribution to First Data’s adjusted earnings per share in the first full year post closing. Synergies are expected after that.
Investors for sure will keep an eye on this new deal and its impact post closure to see if it can further boost the momentum in the commerce-enabling technology company’s shares.
We observe that First Data has outperformed the industry it belongs to on a year-to-date basis. The company’s shares have gained 12.5% compared with the industry’s growth of 7%.
Why the Deal?
The acquisition is in line with the company’s strategy to enhance its product suite and overall offerings to JVs, partners and other distribution channels.
BluePay’s integrated Card-Not-Present solutions when combined with First Data’s CardConnect ISV capabilities will allow the latter to expand its market share in the high growth integrated payments space.
According to First Data chairman and CEO, Frank Bisignano, “This acquisition allows us to improve our service offerings for our JV alliances and other distribution partners.”
Moreover, the addition of BluePay’s capabilities will create a number of opportunities for First Data in the ERP space and help it better manage cash and other services for clients.
On the other hand, BluePay, a provider of payment processing and technology solutions, will benefit from CardConnect’s merchant and partner management tools. The company will get a considerably larger distribution network.
We expect minimal integration risk given First Data’s successful partnership with BluePay.
Bottom Line
Acquisitions and strategic partnerships are the most important part of First Data’s growth program. First Data continues to maintain its leading position in bank-acquiring channel through these acquisitions and partnerships.
We see the new move as First Data’s strategy to increase its presence globally. The company expects this integration to enhance service to partners and clients.
For this, the company had acquired peer payment processor CardConnect Corp in an all-cash transaction in July. The deal aimed at increasing focus on globalizing its offerings and strategic partnerships along with boosting its business around enterprise clients.
First Data Corporation Price and Consensus
First Data Corporation Price and Consensus | First Data Corporation Quote
Zacks Rank and Stocks to Consider
First Data currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Groupon Inc. GRPN, PetMed Express, Inc. PETS and SMART Global Holdings, Inc. SGH, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings per share growth rate for Groupon, PetMed Express and SMART Global is projected at 10%, 10% and 15%, respectively.
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