Monday , December 17, 2018

KKR To Reduce Its Stake in First Data Through a Secondary Stock Offering, But Will Still Retain Voting Control

With First Data Corp.’s stock on the rise, KKR & Co. Inc., the investment firm that controls most of the payment processor’s voting shares, is planning a secondary stock offering that will reduce its stake but still leave it firmly in control.

First Data announced Monday that an affiliate of New York City-based KKR, which took the company private in a $29 billion 2007 leveraged buyout, is proposing to sell 64 million Class A shares of First Data common stock in the offering. Underwriters also have an option to buy another 9.6 million shares.

Based on Monday’s opening price of $23.88 per share, a sale of 64 million shares would gross $1.53 billion before underwriting expenses.

The sale will reduce KKR’s holdings of First Data’s Class A shares, which trade on the New York Stock exchange. But KKR affiliates and some other entities that own its Class B shares will still control approximately 87% of the company’s voting power and 41% of its equity ownership, according to a prospectus for the offering. The Class B stock has 10 votes per share versus one for each Class A share.

The planned sale comes at a time when New York-based First Data’s stock has been on the upswing. According to historical share prices listed in the prospectus and Digital Transactions News’calculations, First Data’s shares traded at an average of $18.43 in the second quarter, up nearly 29% from $14.32 in 2016’s fourth quarter.

The LBO left First Data with about $20 billion in debt. First Data went public again with an October 2015 IPO. Since then, the company has been gradually reducing debt while still making acquisitions and introducing new products in an effort to remain the No. 1 payment processor by transaction volume. In the second quarter, First Data said net income jumped 65% year-over-year to $402 million.

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