Shares of Global Payments Inc. GPN hit a 52- week high of $158.73, on May 24, after sources cited possibilities of its taking over Total System Service, Inc. TSS.
This leading payment service provider gained 3.7% in the last trading day, as investors cheered the news. The stock has rallied 37% in a year’s time, compared with the industry’s growth of 18%.
The deal, estimated at about $20 billion, will be the biggest in the history of Global Payments. It reflects its buyout strategy in order to achieve growth via inorganic means.
Total System, a merchant acquirer and credit card issuer and the largest third-party credit-card processor in the United States will perfectly complement Global Payments’ operations. It provides banks with credit and debit card portfolio management services which includes card authorization to detect fraud and calculating rewards. Global Payments, in the meanwhile, is the country’s fifth-largest merchant acquirer, helping businesses handle credit and debit card payments.
Global Payments has several profitable acquisitions to its credit, which have broadened its business along with diversifying its operations across products and geographies.One of the most notable among these is the purchase of Heartland Payments Systems in 2016. The merger significantly expanded Global Payments’ small and medium-sized enterprise distribution, merchant base and vertical reach in the United States.
Other acquisitions which include assets of FIS Gaming Business, Pay and Shop Limited, Ezidebit, PayPros, eWay, the communities and sports divisions of ACTIVE Network, and AdvancedMD have enhanced the company’s overall business.
These buyouts have boosted Global Payments’ software-driven payments strategy. The SICOM deal has increased the company’s capabilities and expanded its presence in the restaurant vertical market. AdvancedMD, in the meanwhile, has allowed it to enter the healthcare vertical market, which has strong payment fundamentals and attractive opportunities.
Global Payments’ acquisition strategy is backed by the strong and stable cash generated from operations over the past many years.
The payments industry is consolidating fast due to its rapid transition to cashless and digital platform, thanks to the proliferation of technology. A number of deals in the recent months point to increased deal activity in the space.
So far this year, the industry has reported two mega merger deals — Fidelity National Information Services Inc. FIS to acquire Worldpay and Fiserv to buy First Data Corp. FDC. In 2018, PayPal announced a $2.2-billion takeover of startup company iZettle.
Global Payments carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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