KKR agrees to acquire First Data for $29bn

Kohlberg Kravis Roberts & Co. (KKR), one of the world’s largest and most successful private equity firms, on Monday agreed to acquire First Data Corp., the credit-card processing firm, for about $29 billion, making it one of the world's largest leveraged buyout (LBO) deals ever.

Under the deal, KKR will pay $34 a share in cash for First Data shareholders, representing a premium of approximately 26 percent over First Data's closing share price of $26.90 on Friday (March 30, 2007). The offer price also represents a premium of nearly 34 percent over the average closing share price during the previous 30 trading days.

KKR’s buyout price tag puts the deal only behind Chicago-based Equity Office Properties and the Tennessee, United States based world’s largest private operator of health care facilities, HCA Inc. in terms of largest LBO deals.

"We believe that current market conditions present an exceptional opportunity to fulfill our commitment to maximize the value of First Data by delivering an immediate cash premium to our shareholders," said Ric Duques, chairman and Chief Executive of First Data Corporation.

The First Data board of directors has unanimously approved the proposal. However the deal is still subject to the approval of First Data shareholders, regulatory approvals and customary closing conditions. The deal is expected to close by the end of the third quarter of 2007.

KKR's latest deal follows its acquisitions of retailer Dollar General Corp. and Laureate Education Inc, and TXU. KKR that helped develop and popularize the acquisition concept known as the leveraged buyout (LBO) by creating a series of limited partnerships to acquire various corporations in association with Texas Pacific Group reached a deal in February to buy Texas Utility TXU Corp. for nearly $32 billion in cash.

The New York City-based private equity firm and billionaire Stefano Pessina last week increased their bid for Alliance Boots Plc, the largest U.K. drugstore chain, to $19.9 billion. The private equity firm also bought RJR Nabisco for $25.1 billion in 1988.

Under the terms of the deal, First Data may solicit proposals from other suitors for the next 50 days. In accordance with the agreement, the board of directors of First Data, through its Strategic Review Committee and with the assistance of its independent advisers, intends to actively solicit proposals during this period. Evercore Group will advise First Data in that search, while Morgan Stanley advised it on the KKR deal.

Citigroup, Credit Suisse, Deutsche Bank, HSBC, Lehman Brothers, Goldman Sachs are providing debt financing and advised KKR.

On their merger plans with the Credit-card and payment processor which according to KKR is at the forefront of the worldwide trend toward electronic payments, Scott Nuttall, one of KKR members said, "We believe that through continued investments in technology, people and customer relationships, First Data will build on its history of innovation and industry leadership."

Established in 1976 and led by co-founding members Henry Kravis and George Roberts, KKR has become a global firm with offices in New York, Menlo Park, London, Paris, Hong Kong, and Tokyo, operating as a single firm with a single culture.

Spun off from American Express Co. in 1992, First Data works as an information-processing company and handles billions of credit-card and other transactions for third parties. According to The Journal, the company has struggled in recent years to organize its international, commercial and retail-processing units. First Data processes checks, debit cards and credit card transactions and had $7.1 billion in sales last year and about $2.5 billion of long-term debt as of Dec. 31.

Shares of First Data rose 26 percent to $33.62 in German trading today.