Basics of the transaction
As we saw in the first part of this series, Global Payments (GPN) is buying Heartland Payment Systems (HPY) in a cash and stock merger. The equity value is $3.6 billion. If we include cash and debt, it’s worth $4.1 billion. Shareholders will receive around 0.67 shares of GPN plus $53.28 in cash per each share of HPY that they own.
The following conditions need to be satisfied for the Heartland–Global Payments merger to close:
- Heartland Payment vote
- the SEC’s (Securities and Exchange Commission) approval of the joint proxy statement
- Global Payment’s filing of a PNR (premerger notification report) to comply with the Hart-Scott-Rodino Antitrust Improvements Act
- any other regulatory approvals
No-shop provision and breakup fees
HPY has a no-shop provision with a “fiduciary out,” meaning that it can’t talk to other potential purchasers while the transaction is pending. However, the “fiduciary out” does allow HPY to talk to a bidder who makes an unsolicited approach if the Board of Directors believes such talks can lead to a bona fide superior offer.
If HPY accepts a superior bid, it will owe GPN a termination fee of $153 million.
Merger arbitrage resources
Other important merger spreads include the deal between Baker Hughes (BHI) and Halliburton (HAL). For a primer on risk arbitrage investing, check out Merger arbitrage must-knows: A key guide for investors.
Investors who are interested in trading in the financial sector should look at the S&P SPDR Financial ETF (XLF).