First Data Looks To IPO Shares

First Data is eyeing a return to the public markets, roughly eight years after being taken private by KKR & Co.

The payments processing company filed a registration statement with the Securities and Exchange Commission Monday (July 20), among the first steps of bringing its shares public.

At the time that First Data was taken private by KKR in 2007, the $26 billion deal was among the larger transactions in the private equity space.

The Wall Street Journal reported Monday that an IPO, should the shares indeed be publicly listed, would value First Data at roughly $40 billion (a figure that would include both equity and debt), with application of enterprise value/EBITDA ratios similar to those seen in companies such as Vantiv. The EV/EBITDA multiple is used as a rough proxy to how much investors will pay for a cash flow stream. PayPal, which IPO’d yesterday, has a valuation of roughly $50 billion.

In looking at the S-1, First Data said 59 percent of segment revenues came from its global business solutions unit, while the remainder came split relatively evenly between global financial solutions and network security. The 2014 top line came in at $11.2 billion. EBITDA was about $2.7 billion with a division roughly along the same lines as revenues.

The filing noted that the company has scale across 6 million business locations, with 4,000 financial institutions, and clients stretch across 118 countries. The filing said that transactions processed top $1.9 trillion annually.

Further insight into First Data’s outlook and recent results is likely to come when KKR reports its second quarter results on Thursday. Citing unnamed sources, WSJ stated that an offering could top $1 billion should shares debut in an IPO.

As WSJ noted, First Data had been hit by the recession as credit card transactions dipped then, with a subsequent slide in the value of the business — at one time, KKR valued First Data at just $.60 on the dollar. KKR invested an additional $1.2 billion in First Data last year. A new management team was brought in in 2013 to turn things around. Profits returned to the First Data bottom line for the first time in seven years in early 2015. That helped lead to a valuation of $1.18 on the dollar as recently as March, according to KKR.

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The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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