Financial technology firms Fiserv and First Data will combine under the Fiserv name in a $22 billion buyout.
First Data has operations in Delaware on Carr Road in north Wilmington that serve the state’s massive financial services industry.
Fiserv is based in suburban Milwaukee, WI. First Data is based in Atlanta, with executive offices in New York City.
Cost cutting is expected as the companies combine. Job cuts could hit Omaha, an employment hub for First Data.
The Hustle subscription newsletter noted that the two companies are old-timers in the financial technology industry (fintech). That industry is facing competition from Silicon Valley-financed start-ups and more mature companies like PayPal, Square and others.
Meanwhile, First Data, which for a time to have few competitors in some business lines, loaded up on debt in a buyout.
Under the terms of the stock deal, First Data shareholders will receive a fixed exchange ratio of 0.303 Fiserv shares for each share of First Data common stock they own.
Under the deal, Fiserv shareholders will own 57.5 percent of the combined company, and First Data shareholders will own 42.5 percent.
The complementary combination will include the Clover cloud-based point-of-sale solution.
“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information,” said Jeffery Yabuki, CEO of Fiserv. “We admire First Data for its excellence in merchant acquiring and global issuing services, and the tremendous progress they have made under Frank’s leadership. We expect this combination to catalyze and support an enhanced value proposition for our collective clients and their customers.”
Fiserv and First Data will link their respective merchant and cash management capabilities, further developing new offerings and providing First Data’s Clover cloud-based platforms for small and medium-sized businesses.
Following the close of the transaction, the combined company expects to invest $500 million over five years to accelerate growth, a release stated.
The announcement claimed revenue growth is expected to come from a focus on delivering additional client value in areas such as bank merchant services, Clover point of sale, credit processing, additional biller services and network innovation.
The combination is expected to generate approximately $900 million of run-rate cost synergy savings over five years as the companies combined administrative and other functions.
