Equity firm buys First Data for $29B

Electronic payments and commerce company First Data Corp. has attracted a huge US$29 billion price tag after its board of directors unanimously agreed that it be acquired by an affiliate of private equity firm Kohlberg Kravis Roberts & Co. (KKR).

Announced Monday, the deal values First Data at $34 per share, a substantial premium of 26.4 percent on the company’s common stock, which closed at $26.90 on Friday.

First Data provides a wide variety of payment products and services to help merchants and financial institutions around the world validate and process payments. Its customers include 4.9 million merchant locations and 1,900 card issuers.

The agreement allows First Data to approach other third parties to encourage more bids for the company over the coming 50 days. But should no other deal prove as attractive, First Data and KKR expect to close the purchase deal, subject to shareholder and regulatory approvals, by the end of the third quarter of this year.

First Data went public in 1992 after being spun out from American Express Co. The company, which has its headquarters in Greenwood Village, Colorado, has steadily grown through acquisitions, making its latest move last month with an agreement to purchase Polcard SA, a Polish payment services provider for $325 million in cash.

At the same time, First Data has been involved in a major restructuring initiative designed to cut costs and improve its competitiveness. In November 2005, Henry Duques returned to helm the company and lead the reorganization. He’d previously been chairman of First Data from 1989 to 2003 and chief executive officer from 1989 to 2002.

Last year, Duques split the business into four main segments — commercial services, financial institution services, international, and integrated payment systems. First Data also spun off its Western Union money transfer operation in September into an independent, publicly traded company.

As fewer people use paper check transactions, First Data is moving to exit its check and money order operations over the next two to three years.

Founded in 1976, private equity firm KKR focuses on management buyouts, investing in 11 transactions in the financial services and processing sectors over the past 30 years to the tune of more than $35 billion of aggregate value.