Ending weeks of speculation, fuel-card provider FleetCor Technologies (FLT) late Tuesday agreed to buy business-to-business e-payments firm Comdata for $3.45 billion, saying the deal would "dramatically" increase its "overall scale, earnings base and diversity.
FleetCor, which said the deal would boost 2015 earnings, rose 3% to about 133.60 in after-hours trading. Shares had closed down nearly 2% to 129.44.
Comdata facilitates more than $54 billion in payments a year and supplies items such as fleet cards and virtual cards to a customer base of more than 20,000.
"Comdata's virtual payments business will add a completely new growth leg to FleetCor," said CEO Ron Clarke in a press release. "We believe that the combination will result in significant synergies as we implement our operating disciplines to their portfolio of businesses.
Georgia-based FleetCor provides fleet cards and payment services to commercial fleets, oil companies and petroleum marketers. The company has partnerships with brands that include Shell (RDSA), BP (BP) and MasterCard (MA) . The company is acquiring Comdata from Ceridian, which is affiliated with Thomas H. Lee Partners LP and Fidelity National Financial (FNF). A THL representative will get a seat on FleetCor's board.
The deal is expected to close by the end of the year. It will be financed by about $2.4 billion in new debt and 7.3 million shares of common stock to Ceridian, with cash payment going toward Comdata's outstanding debt.
FleetCor reported earnings at the end of July. Earnings per share grew 27% to $1.27, beating by 2 cents. Revenue increased 23.8% to $273.5 million, just falling short of analyst estimates.
Shares had spiked to a new high of 138.19 on July 31, ahead of earnings, on talk of a Comdata deal, then pulled back on the mixed results.
FleetCor expects Comdata to be "meaningfully accretive" to earnings in 2015. It sees the company contributing 50-60 cents per share for total consolidated adjusted EPS of $6.25 to $6.45.
"While our financial leverage will increase, we expect to de-lever quickly from the combined cash flow of the businesses," said CFO Eric Dey in the release. "The new credit facility will also provide additional liquidity for future business development activity.
Buyout firms Carlyle Group (CG) and Silver Lake Partners reportedly had been interested in Comdata.
FleetCor is part of the IBD 50 list of top-rated stocks. It boasts a Composite Rating of 96 out of 99, meaning it outperforms 96% of all stocks based on a variety of fundamental and technical factors.