Is Global Payments Paying Too Much for Heartland?

Global Payments Inc. (NYSE: GPN) and Heartland Payment Systems Inc. (NYSE: HPY) are balancing each other out in terms of their losses and gains on the day, on news of a merger. Global Payments announced that it has entered into a definitive agreement to acquire Heartland Payment to the tune of a cash-and-stock transaction for $100 per share, or approximately $4.3 billion.

Specifically, consideration for the transaction will consist of 0.6687 shares of Global Payments stock and $53.28 for each share of Heartland stock at closing, subject to the terms of the merger agreement.

Global Payments expects to realize at least $50 million in synergies in fiscal 2017 and approximately $125 million of annual run-rate synergies thereafter.

Thomson Reuters estimates Heartland’s revenue for the 2015 full year to be roughly $820 million, while the 2016 expected revenue is estimated at nearly $900 million.

The transaction is still subject to shareholder and regulatory approval, but both companies expect it to close by halfway through the 2016 calendar year.
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Jeffrey S. Sloan, chief executive of Global Payments, commented on the acquisition:

This partnership with Heartland marks a major milestone for our company, significantly enhancing our direct presence in our largest market and transforming Global Payments into the leading provider of integrated payments technology solutions in the world. The combination of strong businesses and cultures in high growth markets will generate exceptional opportunities for our employees, customers, partners and shareholders worldwide.

Robert O. Carr, chairman and CEO of Heartland, added:

Under Jeff’s leadership, I believe the combination of our companies will become the most valuable payments company on the planet. Heartland is excited to team with a truly international company. In the U.S., Heartland will continue to operate under its brand and under its business model of fair dealing–with the Merchant Bill of Rights and the Sales Professional Bill of Rights guiding the way to future growth and innovation.

Shares of Global Payments were trading down 11% at $63.48 on Wednesday, with a consensus analyst price target $70.32 and a 52-week trading range of $38.60 to $74.64.

Heartland Payment shares were trading up 10% at $93.71. The consensus price target is $78.57, and the 52-week range is $46.65 to $95.16.