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Fiserv–First Data Deal Draws Scrutiny

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Mar. 15 2019, Published 10:19 a.m. ET

Probe focuses on consideration’s adequacy

A law firm led by Louisiana’s former attorney general is investigating the proposed merger between Fiserv (FISV) and First Data (FDC). Kahn Swick & Foti is seeking to determine whether the deal’s consideration for FDC shareholders is adequate.

Under the deal, Fiserv is set to swallow FDC in a transaction that values the latter at $22 billion, and FDC shareholders are to receive their consideration in the form of Fiserv stock. The consideration is 0.303 Fiserv shares for each FDC share.

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Over $4.0 billion in free cash flow

Fiserv and FDC announced the agreement to combine their operations in January, saying the transaction could create a global leader in payment and financial technology, save $900 million in annual costs, and boost their annual revenue by at least $500 million. The company also sees the opportunity to generate more than $4.0 billion in annual free cash flow by the third year of the deal’s closing.

Mounting competitive pressure

Fiserv and FDC serve banks, merchants, and other businesses with a range of products, including processing payments and moving money. However, they have come under increasing pressure in recent years from more Internet-oriented providers such as PayPal (PYPL), Amazon (AMZN), and Square (SQ). The pressure can be seen in the companies’ slowing or lack of growth. In the fourth quarter, Fiserv’s revenue rose just 2.0% YoY (year-over-year) to $1.6 billion, while FDC’s fell 24% YoY. In contrast, PayPal’s, Amazon’s, and Square’s revenue grew 13%, 20%, and 51% YoY, respectively, in the December quarter.

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