CEO Judge’s Sudden Retirement Casts a Cloud of Uncertainty Over First Data

Citing health reasons, First Data Corp. chief executive Jonathan J. Judge on Friday announced plans to retire. The unexpected retirement casts a cloud of uncertainty over the nation’s largest payment processor as it competes in a fast-changing payments industry and, down the road, prepares for a possible IPO or sale that would relieve its heavy, $22.5 billion debt burden.

“While my plans didn’t anticipate such an early retirement, those plans needed to be changed for the benefit of my health,” Judge said in a news release. “The directors have been very understanding and very gracious in their accommodation.”

First Data gave no details about Judge’s health problems. The company’s board of directors will begin a CEO search, and Judge plans to stay on during the transition but no later than March 31, according to a First Data filing with the Securities and Exchange Commission.

Judge, a 26-year IBM Corp. veteran and the former president and CEO of payroll services provider Paychex Inc., became chief executive of First Data in September 2010. That was three years after the company’s $29 billion leveraged buyout by Kohlberg Kravis Roberts & Co.

Since then, Judge has overseen growth in First Data’s merchant-processing business, which brings in more than half of company revenues, consolidated processing facilities, and refinanced debt that has postponed billions in principal repayments. In a September interview with Digital Transactions magazine, Judge said “we do need to have a de-levering event at some point,” though he wouldn’t say when.

Meanwhile, First Data’s processing business for card issuers remains slow growing and its check-services segment is in a long-term decline, which is no surprise given the drop-off in consumer check writing. But even its international segment’s revenues slipped by 6% in 2012’s third quarter.

“Globally the payment-processing opportunity remains huge,” payments industry veteran Eric Grover, principal of Minden, Nev.-based consulting firm Intrepid Ventures, tells Digital Transactions News by e-mail. “First Data ought to be generating solid double-digit growth. In many emerging markets, leaning into the opportunity, anything less than smoking is disappointing.”

First Data provided no particulars about its CEO search. Grover says an obvious internal candidate would be Edward Labry, president of First Data’a North American businesses, which account for 85% of company revenue. But whoever succeeds Judge should be keen on identifying opportunities domestically and internationally, according to Grover.

“First Data needs a global growth payments guy at the helm, somebody who credibly looks at the payments world as First Data’s oyster,” he says.

Judge’s retirement contract calls for him to be paid a total of $7.5 million over two years after his resignation date.