Innovation is the Mother of Disruption
Global Payments (tkr: GPN), and Total System Services/TSYS (tkr: TSS), agreed to combine in an all-stock transaction valued at approximately $21.5 billion. One could argue that Global Payments and TSYS needed to merge to better compete with recent payment mergers, in particular Fiserv and First Data. However, what’s the root cause of the merger activity? Innovation of course. Market disruption caused by innovation. PayPal (tkr: PYPL), and Square (tkr: SQ), have enjoyed significant growth in large part due to Peer-to-Peer (“P2P”), payment transaction growth which we have previously written about in these pages. The level of success so great that a consortium of America’s largest banks were forced to retort with their own collective P2P offering – Zelle. P2P is the single greatest disruptive force in the payments industry. PayPal’s P2P offering – Venmo – is especially ingenious for incorporating Facebook connections.
The second disruptive force that doesn’t get quite the same amount of airtime is the presence of large Technology platform players led by Apple’s Apple Pay. While mobile wallets have yet to go mainstream, they are gaining traction. Google, Samsung, Microsoft, Alibaba and Amazon all have a play in the broadly-defined payments universe. Further, Facebook and others have made noise about cryptocurrency-based e-commerce.
GPN/TSS Deal Terms
Under the terms of the merger agreement, TSYS shareholders will receive 0.8101 Global Payments shares for each share of TSYS common stock, representing an equity value for TSYS of approximately $21.5 billion. This reflects a price per share of $119.86 for each share of TSYS common stock, and an approximately 20% premium to TSYS’ unaffected common share price as of the close of business on May 23, 2019. Upon closing, Global Payments shareholders will own 52% of the combined company, and TSYS shareholders will own 48% on a fully diluted basis. The merger agreement has been unanimously approved by each company’s Board of Directors.
Here is a link to the Global Payments, TSYS deal deck: HERE