KBW Talks GPN / TSS Merger in Mobile Payments
Interesting news has recently emerged on the payments front, as a merger between two fairly big names in the field—Total System Services (TSS) and Global Payments Inc (GPN)—has ultimately taken place. Our friends out at Keefe, Bruyette & Woods (KBW) not only tipped us off about the merger of equals’ existence, but also about what it considered the ramifications of such a merger taking place.
The word out of KBW hits a sledgehammer blow. GPN and TSS are major names in the field, as TSS is the United States’ largest third-party credit card processor while GPN is the fifth largest merchant acquirer in the US.
What’s more, both firms have something of a presence in other markets as well. GPN’s operations include about 25 percent of revenues generated completely outside North America, and TSS splits its operations between card issuer processing (45 percent), merchant acquiring (35 percent) and prepaid solutions (20 percent).
The merger calls for TSS shareholders to receive 0.8101 shares of GPN for each share of TSS stock owned, representing a total equity value of $21.5 billion US, about a 20 percent premium to the May 23rd closing value. Synergies, meanwhile, are expected to be realized before three years have passed, likely owing to the companies’ similar cultures. The move will make the combined firm one of the largest software companies in the US, and with a focus on payments processing, should give it a real edge in the market.
Mergers aren’t a surprise. We’ve had a pretty good run of things economically speaking for the last couple years; to plan for a downturn by consolidating an established position isn’t at all out of line. Further, considering the markets in which these two firms operate, it isn’t a surprise to see them work together, either. They’re in complementary markets, so why not get together? The market in general supports such movement; mobile payments systems are a maturing market and payments processors are fully in a matured market, so some consolidation among players to face conditions is reasonable.
The merger, now established, doesn’t look like a bad deal at all from the outside looking in. With the economy likely to shift gears soon and a matured market on hand, a merger could do both sides some good.