Brookfield, Wisconsin, based Fiserv, Inc. (FISV) has jumped into the acquisition market. The company, which offers services in back-office processing, is set to spend $4.4 billion. On its radar is CheckFree Corp., the electronic payment company.
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The deal has been finalized between Fiserv and CheckFree, the e-payment company based out of Norcross, Georgia. Fiserv will realize a minimum $100 million on an annual basis. It also estimates to realize approximately $125 million in revenue synergies.
The deal is being seen as a bonus for CheckFree shareholders, who stand to get cash benefits of $48.00 per share. This price is a 30% premium over the price at which CheckFree closed on August 1 – $36.83.
Fiserv is looking at 31 December this year as the date by which the entire acquisition process would be completed. Once the formalities are completed, the new entity would be worth $6 billion in terms of pro-forma revenue.
The news of the acquisition is already pushing CheckFree share prices upwards. The shares are being traded at $45.55, which is a climb of $8.72 or 23.68%. The current price it is trading for is the highest CheckFree shares have traded in the last one year. Prior to this it was trading at between $33.28 and $44.74.
The acquisition has also seen Fiserv share prices climb, though not as drastically as in the case of CheckFree. Fiserv shares were trading 7 cents higher than last week, at $49.26. This is well within the range of $42.64 and $59.85 that its shares have been trading over the past one year.
Fiserv’s decision to acquire CheckFree came about after it identified the company as having technology complementary to what it uses. Fiserv has a large number of clients in the financial and industrial domains. Its client base consists of 6,000 processing companies, including the top 100 banks in the United States.
CheckFree has on its client roster 21 of the top 25 financial institutions in America. The company processes a whopping one billion transactions each year. It is one of the top service providers in e-billing and payment, investment management technology, online banking, risk management, ACH payments, fraud management, and other related services.
The new entity would become the single biggest company servicing financial institutions, such as banks, providing them with technology processing solutions. The current CheckFree CEO, Pete Kight, would get a position on the new board as an employee of Fiserv.
As Fiserv CEO Jeff Yabuki put it, the objective of the acquisition was simple: integrate the core competencies of CheckFree with the core account processing and risk management solutions the company provides to create a value proposition that had no equal in the market currently.
The advisers for Fiserv during the deal were Credit Suisse and Sullivan and Cromwell LLP. For CheckFree, the advisers were Goldman, Sachs and Co. and Wachtell, Lipton, Rosen, and Katz.
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