- Combines two of the fastest organic
revenue growth businesses in the payments industry
- Creates the leading global provider of
integrated payments technology solutions
- Accelerates revenue growth, operating
margin expansion and cash earnings per share growth
Global Payments Inc. (NYSE: GPN), a leading worldwide provider
of payment technology services, announced today that it has entered
into a definitive agreement to acquire Heartland Payment Systems,
Inc. (NYSE: HPY), one of the nation’s largest payment
companies.
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The transaction significantly expands Global Payments’ U.S.
direct small and medium-sized enterprise distribution, merchant
base and vertical reach. Heartland’s strengths in direct sales and
technology-led distribution are highly complementary to Global
Payments’ expertise in 60 vertical markets with 2,000 technology
partners. The combination will leverage Global Payments’ scalable,
worldwide infrastructure, and drive substantial technological and
operational synergies.
Global Payments expects to accelerate revenue growth by
combining Heartland’s deep expertise in technology solutions with
its OpenEdge partner integration, network and marketing
capabilities to create a distinctive set of solutions and
distribution. In addition, Global Payments plans to leverage
Heartland’s product and sales capabilities globally through direct
distribution in the 29 countries in which Global Payments currently
does business. Opportunities to cross-sell Heartland’s point of
sale, payroll, loyalty and gift solutions into Global Payments’
core U.S. and international markets will be augmented by deeper
penetration into key Heartland vertical markets including
restaurant and education.
The combined company will provide market-leading payments
solutions to nearly 2.5 million merchants globally. On a combined
basis, the businesses expect to generate in excess of $3.0 billion
of adjusted net revenue and $1.0 billion of EBITDA annually. As a
result of the transaction, Global Payments anticipates raising its
cycle guidance to high-single digit organic adjusted net revenue
growth, up to 75 basis points of cash margin expansion annually and
mid-teens cash earnings per share growth.
“This partnership with Heartland marks a major milestone for our
company, significantly enhancing our direct presence in our largest
market and transforming Global Payments into the leading provider
of integrated payments technology solutions in the world,” said
Jeffrey S. Sloan, Chief Executive Officer of Global Payments. “The
combination of strong businesses and cultures in high growth
markets will generate exceptional opportunities for our employees,
customers, partners and shareholders worldwide.”
“The combination of Global Payments and Heartland will be
transformative for the worldwide payments industry,” said Robert O.
Carr, Chairman and CEO of Heartland. “Under Jeff’s leadership, I
believe the combination of our companies will become the most
valuable payments company on the planet. Heartland is excited to
team with a truly international company. In the U.S., Heartland
will continue to operate under its brand and under its business
model of fair dealing--with the Merchant Bill of Rights and the
Sales Professional Bill of Rights guiding the way to future growth
and innovation.”
Transaction Details
Global Payments will acquire Heartland in a cash-and-stock
transaction for $100.00 per share, representing a transaction value
of approximately $4.3 billion. Consideration for the transaction
will consist of 0.6687 shares of Global Payments stock and $53.28
for each share of Heartland stock at closing, subject to the terms
of the merger agreement. Existing Global Payments’ shareholders
will own approximately 84 percent of the combined entity. Global
Payments intends to fund the cash consideration with
fully-committed debt financing. The merger agreement has been
unanimously approved by each company’s Board of Directors.
Global Payments believes the transaction will be mid-single
digit accretive on a percentage basis to cash earnings per share in
fiscal 2017 and double-digit accretive thereafter. Global Payments
expects to realize at least $50 million in synergies in fiscal 2017
and approximately $125 million of annual run-rate synergies
thereafter.
The parties expect the merger to close in Global Payments’
fiscal 2016 fourth quarter, subject to regulatory approval and
customary closing conditions, as well as approval by Heartland’s
shareholders.
Global Payments’ Second Quarter Fiscal 2016 Summary and
Updated Outlook
- Adjusted net revenue grew 5% to $518
million, compared to $494 million in the second quarter of fiscal
2015, or 12% on a constant currency basis.
- Cash earnings per share grew 15% to
$0.76, compared to $0.66 in the second quarter of fiscal 2015, or
29% on a constant currency basis.
- Cash operating margins were 29.6%,
expanding 60 bps on a constant currency basis year over year.
- GAAP revenues grew 4% to $722 million,
compared to $697 million in the second quarter of fiscal 2015, and
GAAP earnings per share were $0.60, compared to $0.55 in the prior
year.
Cameron M. Bready, Executive Vice President and Chief Financial
Officer of Global Payments, stated, "We are delighted to report
strong results for the quarter, particularly in light of continued
currency translation headwinds across a number of our markets.
Based on these results and our outlook for the remainder of fiscal
2016, we continue to expect adjusted net revenue to range from
$2.06 billion to $2.10 billion, or growth of 6% to 8% and 10% to
12% on a constant currency basis over fiscal 2015. We are again
raising our expectations for margin expansion and cash earnings per
share and now expect annual fiscal 2016 cash operating margin to
increase by as much as 60 basis points on a constant currency basis
and earnings per share on a cash basis to range from $2.90 to
$3.00, reflecting growth of 15% to 19% over fiscal 2015."
Webcast
Global Payments’ management, together with Mr. Carr, will host a
live audio webcast today, December 15, 2015 at 5:00 p.m. ET to
discuss the transaction. To access the webcast, go to the investor
relations page of the company’s website at
www.globalpaymentsinc.com; or callers in North America may dial
877-674-6428 and callers outside North America may dial
970-315-0457. Following the filing of the transcript of today’s
call with the SEC, a webcast replay will be available on Global
Payments’ investor relations website.
About Global Payments
Global Payments Inc. (NYSE: GPN) is a leading worldwide provider
of payment technology services that delivers innovative solutions
driven by customer needs globally. Our technologies, partnerships
and employee expertise enable us to provide a broad range of
products and services that allow our customers to accept all
payment types across a variety of distribution channels in many
markets around the world.
Headquartered in Atlanta, Georgia with approximately 4,500
employees worldwide, Global Payments is a Fortune 1000 Company with
merchants and partners in 29 countries throughout North America,
Europe, the Asia-Pacific region and Brazil. For more information
about Global Payments, our Service. Driven. Commerce brand and our
technologies, please visit www.globalpaymentsinc.com.
About Heartland
Heartland Payment Systems, Inc. (NYSE: HPY), one of the largest
payment processors in the United States, delivers
credit/debit/prepaid card processing and security technology
through Heartland Secure™ and its comprehensive Heartland breach
warranty. Heartland also offers point of sale, mobile commerce,
e-commerce, marketing solutions, payroll solutions, and related
business solutions and services to more than 300,000 business and
educational locations nationwide.
A FORTUNE 1000 company, Heartland is the founding supporter of
the Merchant Bill of Rights, a public advocacy initiative that
educates merchants about fair credit and debit card processing
practices. Heartland also established the Sales Professional Bill
of Rights to advocate for the rights of sales professionals
everywhere.
Important Additional Information and Where to Find It
In connection with the proposed merger, Global Payments will
file with the SEC a Registration Statement on Form S-4 that will
include a proxy statement of Heartland Payment Systems, Inc. that
also constitutes a prospectus of Global Payments, as well as other
relevant documents concerning the proposed transaction. Heartland
will mail the proxy statement/prospectus to its stockholders.
INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE REGISTRATION
STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER
WHEN THEY BECOME AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED
WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE
DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. This
communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval.
A free copy of the proxy statement/prospectus, as well as other
filings containing information about Global Payments and Heartland,
may be obtained at the SEC’s website when filed. (www.sec.gov). You
will also be able to obtain these documents, when filed, free of
charge, from Global Payments at investors.globalpaymentsinc.com or
from Heartland by accessing Heartland’s website at
www.heartlandpaymentsystems.com/investor-relations. Copies of the
proxy statement/prospectus when filed can also be obtained, free of
charge, by directing a request to our Investor Relations department
at Global Payments Inc., 10 Glenlake Parkway, North Tower, Atlanta,
Georgia 30328-3473, Attention: Investor Relations, by calling (770)
829-8234, or by sending an e-mail to
Investor.Relations@globalpay.com or to Heartland’s Investor
Relations department at 90 Nassau Street, Second Floor, Princeton,
NJ 08542 by calling (609) 683-3831 or by sending an e-mail to
Heartland_ir@gregoryfca.com.
Global Payments and Heartland and certain of their respective
directors and officers may be deemed to be participants in the
solicitation of proxies from the Heartland stockholders in respect
of the proposed merger. Information regarding persons who may,
under the rules of the SEC, be deemed participants in the
solicitation of Heartland stockholders in connection with the
proposed merger will be set forth in the proxy statement/prospectus
when it is filed with the SEC. Information regarding Global
Payments’ directors and executive officers is contained in Global
Payments’ Annual Report on Form 10-K for the fiscal year ended May
31, 2015 and its Proxy Statement on Schedule 14A, dated September
25, 2015, which are filed with the SEC. Information regarding
Heartland’s directors and executive officers is contained in
Heartland’s Annual Report on Form 10-K for the year ended December
31, 2014 and its Proxy Statement on Schedule 14A, dated March 27,
2015, which are filed with the SEC.
Forward-Looking Statements
Investors are cautioned that some of the statements we use in
this release contain forward-looking statements and are made
pursuant to the "safe-harbor" provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
involve a number of risks and uncertainties and depend upon future
events or conditions. Actual events or results might differ
materially from those expressed or forecasted in these
forward-looking statements. Accordingly, we cannot guarantee you
that our plans and expectations will be achieved. Such statements
may include, but are not limited to, statements about the benefits
of the proposed merger between Global Payments and Heartland,
including future financial and operating results, the combined
company's plans, objectives, expectations and intentions and other
statements that are not historical facts. Important factors, among
others, that could cause actual events or results to differ
materially from those anticipated by our forward-looking statements
or historical performance include the ability to meet closing
conditions to the merger at all or on the expected terms and
schedule, including without limitation the approval of Heartland’s
stockholders and other regulatory approvals required for the
merger; delay in closing the merger or failure to consummate the
merger; difficulties and delays in integrating the Heartland
business or fully realizing cost savings and other benefits of the
merger at all or within the expected time period; business
disruption during the pendency of the merger or following the
merger making it more difficult to maintain business and
operational relationships, including financial institution
sponsorship; loss of key personnel, Global Payments’ and
Heartland’s ability to accurately predict future market conditions;
and changes in laws, regulations or network rules or
interpretations thereof impacting Global Payments or Heartland.
Additional factors that could cause events or results to differ
materially from those anticipated by our forward-looking statements
or historical performance can be found in Global Payments’ Annual
Report on Form 10-K for the year ended May 31, 2015, Heartland’s
Annual Report on Form 10-K for the year ended December 31, 2014 and
each company’s subsequent filings with the SEC. Our forward-looking
statements speak only as of the date they are made and should not
be relied upon as representing our plans and expectations as of any
subsequent date. We undertake no obligation to revise any of these
statements to reflect future circumstances or the occurrence of
unanticipated events.
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES (In thousands, except per
share data)
Three Months EndedNovember 30, 2015
Three Months EndedNovember 30, 2014
Revenues:
GAAP Revenues $ 722,350 $ 697,291 Adjustments1 (204,048 )
(203,626 ) Adjusted Net Revenue $ 518,302 $ 493,665
Operating
Income:
GAAP Operating Income $ 123,165 $ 123,984 Adjustments2
30,043 23,342 Cash Operating Income $ 153,208
$ 147,326
Earnings Per
Share3:
GAAP Diluted EPS $ 0.60 $ 0.55 Acquisition-related intangible
assets, share-based compensation expense and non-recurring items4
0.16 0.11 Cash EPS $ 0.76 $ 0.66
OUTLOOK SUMMARY (In billions, except
per share data) Fiscal 2015 Actual Fiscal 2016 Outlook5 % Change
Revenues:
GAAP Revenues $ 2.77 $2.87 to $2.95 4% to 6% Adjustments1
(0.82 ) (0.83 ) Adjusted Net Revenue $ 1.95
$2.06 to $2.10 6% to 8%
Earnings Per
Share3:
GAAP Diluted EPS $ 2.06 $2.36 to $2.46 15% to 19%
Acquisition-related intangible assets, share-based compensation
expense and non-recurring items6 0.46 0.54
Cash EPS $ 2.52 $2.90 to $3.00 15% to 19%
1 Represents adjustments to revenues for gross-up related
payments (included in operating expenses) associated with certain
wholesale lines of business to reflect economic benefits to the
company and, in the third quarter of fiscal 2015, a revenue
adjustment for select UK customer payments related to a vendor
outage. 2 Reflects acquisition intangible amortization of
$21.5 million, share-based compensation expense of $7.0 million and
non-recurring items of $1.5 million for the three months ended
November 30, 2015. Reflects acquisition intangible amortization of
$18.3 million and share-based compensation expense of $5.0 million
for the three months ended November 30, 2014. 3 Earnings per
share data for prior periods have been adjusted to reflect a
two-for-one stock split in the form of a stock dividend paid on
November 2, 2015. 4 For the three months ended November 30,
2015, reflects acquisition intangible amortization of $0.11,
share-based compensation expense of $0.03 and non-recurring items
of $0.02, each including the related income tax effects. For the
three months ended November 30, 2014, reflects acquisition
intangible amortization of $0.09 and share-based compensation
expense of $0.02, each including the related income tax effects.
5 The Fiscal 2016 Outlook does not include the effect of the
announced acquisition of Heartland Payment Systems. 6 Fiscal
2015 reflects acquisition intangible amortization of $0.34,
share-based compensation expense of $0.09 and non-recurring items
of $0.03, including a revenue adjustment for select UK customer
payments related to a vendor outage and expense adjustments for
charges related to employee termination benefits, non-cash losses
from the retirement of property and equipment, a
transaction-related tax associated with the acquisition of Realex,
certain business tax assessments in the U.S. for prior periods, a
gain on the sale of our Russia ATM business, reversal of previously
recorded interest expense associated with a previously uncertain
tax position and the related income tax effects of each.
NON-GAAP FINANCIAL
MEASURES
Global Payments supplemented revenues, income and earnings per
share information determined in accordance with GAAP by providing
income and related earnings per share on a "cash earnings" basis
and Adjusted Net Revenue in this earnings release to assist with
evaluating performance. In addition to GAAP measures, management
uses these non-GAAP measures to focus on the factors we believe are
pertinent to the daily management of our operations. Management
believes Adjusted Net Revenue more closely reflects the economic
benefits to the company's core business and allows for better
comparisons with industry peers. Management uses these non-GAAP
metrics, together with other metrics, to set goals for and measure
the performance of its business and to determine incentive
compensation. Our Adjusted Net Revenue and income and earnings per
share reported on a cash earnings basis should be considered in
addition to, and not as a substitute for, revenues, income and
earnings per share determined in accordance with GAAP. Our measures
of Adjusted Net Revenue, income and earnings per share on a cash
earnings basis reflect management's judgment of particular items,
and may not be comparable to similarly titled measures reported by
other companies.
Adjusted Net Revenue excludes gross-up related payments
associated with certain wholesale lines of business to reflect
economic benefits to the company. On a GAAP basis, these payments
are presented gross in both revenues and operating expenses. Income
and the related earnings per share on a cash earnings basis exclude
acquisition-related amortization expense, share-based compensation
and certain other items specific to each reporting period. The tax
rate used in determining the net income impact of cash earnings
adjustments is either the jurisdictional statutory rate in effect
at the time of the adjustment or the jurisdictional expected annual
effective tax rate for the period, depending on the nature and
timing of the adjustment.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151215006816/en/
Global Payments Inc.Investor contact:Jane Elliott,
770-829-8234investor.relations@globalpay.comorMedia contact:Amy
Corn, 770-829-8755media.relations@globalpay.comorFor
HeartlandGregory FCAJoe Hassett,
610-228-2110Heartland_ir@gregoryfca.com
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