Fiserv Prices Senior Notes

Zacks

Recently, Fiserv, Inc. (FISV) declared the pricing of its senior notes offering of principal amount $700 million, due to mature in 2022. The senior notes carry an interest rate of 3.500%.

The company expects the offering to be completed by September 25, 2012, upon the fulfillment of certain customary conditions. Book-running managers currently acting for this notes offering are Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, Mitsubishi UFJ Securities (USA), Inc. and U.S. Bancorp Investments, Inc.

The net proceeds from the offering shall be used to repay a part of the company’s term loan facility, which is due to mature in November 2012.

The company exited the second quarter of 2012 with cash and cash equivalents of $302 million, decreasing from $311 million at the end of the previous quarter. Long-term debt remained somewhat consistent at $3.2 billion compared with the previous quarter. Year-to-date, net cash provided by operating activities amounted to $385 million with free cash flow of $298 million (net capital expenditures being $102 million).

For the full year 2012, management projects an annual adjusted revenue growth of 4%–6% and adjusted internal revenue growth of 3.0% – 4.5%. Adjusted earnings per share are likely to be in the range of $5.08 – $5.20, representing a yearly growth of 11%–14%.

The company’s primary competitors include big players such as Mastercard Incorporated (MA), Fidelity National Information Services, Inc. (FIS) and Total System Services, Inc. (TSS). Moreover, Fiserv faces an ongoing threat from billers and self-sufficient financial institutions that develop and use their own electronic payment transactions and Internet banking solutions.

We have a Neutral recommendation on Fiserv. The stock retains a Zacks# 3 Rank (‘Hold’ rating in the short term).

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