First Data Launches Its IPO With an Offering That Could Value Processor at $17.6 Billion

By John Stewart

Payments-processing titan First Data Corp. on Thursday launched its long-awaited effort to go public with an initial offering of stock that would value the company at as much as $17.6 billion and raise as much as $3.2 billion. The IPO could well be the largest seen on Wall Street this year.

In a statement issued Thursday, Atlanta-based First Data says it expects to sell 160 million shares of Class A common stock priced between $18 and $20 each. An additional 24 million shares of the common stock would be available to the underwriters at the same price under a 30-day option. Some 879 million shares of stock are expected to be outstanding after the offering, including some 719 million Class B shares, valuing the company at anywhere from $15.8 billion to $17.6 billion.

The company will be listed on the New York Stock Exchange under the symbol “FDC.”

After fees and other costs, First Data expects the offering to raise net proceeds of $2.9 billion at the $19 mid point of the price range, though an additional $500 million in net proceeds could become available if the underwriters exercise their purchase option. With this cash, the company plans to retire $510 million in 11.25% senior unsecured notes due 2021. It says it will also redeem $2 billion in 12.625% senior unsecured notes, due 2021, pay premiums and other expenses, and take care of “general corporate purposes.”

First Data reported $20.7 billion in total debt as of June 30, a legacy of its $29 billion leveraged buyout by Kohlberg Kravis Roberts in 2007. After the offering, KKR and its affiliates, which will hold the bulk of Class B shares, will command the majority of shareholder voting power, as each Class B share controls 10 votes while Class A shares control one vote each, according to First Data’s filing Thursday with the Securities and Exchange Commission.

First Data’s sprawling operations include processing for both merchants and card issuers. It claims leading positions in both markets, serving 6 million merchant locations and 4,000 financial institutions. It also owns the Star debit network, one of the largest electronic funds transfer systems in the country. All told, the company processed 74 billion payment transactions last year worth $1.7 trillion.

In part because of the interest expense on its massive debt load, First Data has reported net losses for a number of years. It narrowed that loss, however, in the first six months of this year to $30 million, down from $142 million in the same period in 2014. Revenue ticked up to $5.57 billion in the first half of 2015 from $5.48 billion in the first six months of 2014.

The IPO has been anticipated in the payments industry and on Wall Street for months. First Data filed a registration statement for the IPO with the SEC in July and named its underwriters in August.