End of 50-Day Go-Shop” Period Leaves KKR As Sole First Data Suitor”

The proposed $29 billion buy-out of leading payment processor First Data Corp. by private-equity firm Kohlberg Kravis Roberts & Co. cleared another hurdle on Tuesday when First Data reported that its 50-day “go-shop” period had ended without netting any competing bids.n
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In announcing the buyout in early April, First Data said its board of directors would solicit rival bids despite having the KKR proposal in hand (Digital Transactions News, April 2). In response to a Digital Transactions News question on whether First Data found anyone expressing even initial interest, a company spokesperson today said “no” in an e-mail reply.n
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Many observers regarded the go-shop clause as a formality to protect shareholder interests in what was essentially a done deal. Still, payments consultant Steve Mott, principal of Stamford, Conn.-based BetterBuyDesign, said he was a bit surprised that no other bid emerged given the huge amount of money private-equity firms and hedge funds have to play with today. “I’m pretty sure a rival bid would have had to have been put together by a consortium of smaller players,” he says. “I don’t think any of the big guys were interested in taking on KKR directly.”n
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A new bidder indeed would have faced high financial hurdles. KKR is paying a 26% premium over First Data’s closing share price just before the deal was announced. And First Data could have been liable for paying a $250 million penalty to KKR for backing out of the agreement to pursue a superior offer as a result of the go-shop period, according to First Data’s first-quarter report to the Securities and Exchange Commission. Any withdrawal going forward would now trigger a $700 million penalty. The penalty provision provides for an equal payment by KKR to First Data should the equity firm renege.n
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Greenwood Village, Colo.-based First Data hopes to close on the deal in the third quarter. The next steps include filing a detailed proxy with the SEC, which the spokesperson expects to happen soon, and to obtain required regulatory approvals. n
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Meanwhile, the lack of a rival bid for First Data doesn’t mean that money managers have lost any of their recent interest in payment processors and networks, notes Mott. Just last week, Blackstone Capital Partners VLP announced a $7.8 billion bid to take Alliance Data Systems Corp. private (Digital Transactions News, May 17.)