Digital Transactions Authoritative, insightful and timely information for payments professionals
First Data Corp. filed a registration statement Monday for an initial public stock offering, a long-anticipated move that the highly leveraged payment processor expects will help reduce its debt.
The statement filed with the Securities and Exchange Commission does not say how many shares First Data plans to issue or at what price range. The filing lists an aggregate of $100 million, but that’s merely a placeholder to calculate registration fees. A company spokesperson would not comment on the IPO beyond the filing. Companies planning IPOs often file initial registration statements without such numbers but include them in amended statements later, after they have gauged the investment community’s appetite for their shares.
Legendary buyout firm Kohlberg Kravis Roberts and Co. bought First Data in 2007 in a $29 billion leveraged buyout, the last big LBO before the gathering financial crisis closed the door on such deals.
KKR will still control the majority of the voting power after the IPO, the filing says. First Data will then have two classes of common stock: Each Class A share will have one vote, and each Class B share will have 10 votes. One Class B share will be convertible at any time into one share of Class A stock, the filing says.
First Data had $20.6 billion in long-term borrowings on its balance sheet as of March 31. “The company intends to use the net proceeds from the offering for the repayment of certain indebtedness,” the registration statement says.
First Data had $11.2 billion in revenue in 2014, a $1.4 billion operating profit and a $458 million net loss, mostly because of debt-service costs.
In the statement, First Data reviews the payment-processing market and lists what it says are its competitive strengths. They include a broad array of integrated commerce services, a large distribution platform and global footprint, and an array of technology platforms. The company, which operates in 36 countries and processed 74 billion transactions in 2014, says it is the largest merchant acquirer, serving 6 million locations, and the largest card-issuer processor, with 4,000 bank and credit-union clients. U.S. payment volume came in at $1.7 trillion last year.
Payments consultants say the IPO could enable First Data to pursue acquisitions, expand in high-growth international markets—First Data generates only 25% of its segment revenues outside the United States, according to the prospectus—and take other steps to boost its growth, which they say has lagged its peers.
“Clearly it’s a growth-challenged story,” says long-time First Data observer Eric Grover of Minden, Nev.-based Intrepid Ventures. “What they needed to do and still need to do is [be] a more compelling growth story. They need to be more international. The U.S. is overwhelmingly the dominant market.”
Adds Allen Weinberg, founder of Menlo Park, Calif.-based Glenbrook Partners: “In theory they should be able to free themselves up from what was pretty significant debt at some level, restricting the amount investment they were making. This should free them up in a way [that] we might be seeing more in terms of acquisition, and investment in new technology.”
The registration statement lists First Data’s address as New York City. The company until recently has said its headquarters is in Atlanta, where it has major operations. But chief executive Frank Bisignano, a former JPMorgan Chase & Co. senior executive who took First Data’s reins in April 2013, and some of his top executives are based in lower Manhattan.
Some 104 of First Data’s top 150 executives have been hired since May 2013, the filing says. The company has 23,000 employees worldwide.
