Heartland Payment Systems (HPY), Global Payments Enter Litigation Settlement

As previously disclosed, on December 15, 2015, Heartland Payment Systems, Inc. (“Heartland” or the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Global Payments Inc., a Georgia corporation (“Global Payments”), Data Merger Sub One, Inc., a Delaware corporation and wholly owned subsidiary of Global Payments (“Merger Sub One”), and Data Merger Sub Two, LLC, a Delaware limited liability company and wholly owned subsidiary of Global Payments (“Merger Sub Two”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Global Payments will acquire the Company by way of two mergers. First, Merger Sub One will merge with and into the Company, with the Company continuing as a wholly owned subsidiary of Global Payments. Second, the Company will merge with and into Merger Sub Two immediately following the initial merger, with Merger Sub Two surviving the second merger as a wholly owned subsidiary of Global Payments.

As disclosed in the definitive proxy statement/prospectus dated March 23, 2016 and mailed to Heartland stockholders on or about March 24, 2016 (the “Proxy Statement/Prospectus”), Heartland, the Heartland Board of Directors, Global Payments, Merger Sub One and Merger Sub Two have been named as defendants in a putative class action lawsuit challenging the proposed mergers (the “Action”). The Action was filed in the New Jersey Superior Court, Mercer County, Civil Division, and is captioned Kevin Merchant v. Heartland Payment Systems, et al., L-45-16 (filed January 8, 2016). The complaint alleges, among other things, that the directors of Heartland breached their fiduciary duties to Heartland stockholders by agreeing to sell Heartland for inadequate consideration, agreeing to improper deal protection terms in the merger agreement and failing to properly value Heartland. In addition, the complaint alleges that Heartland, Global Payments, Merger Sub One and Merger Sub Two aided and abetted these purported breaches of fiduciary duty. Plaintiff seeks, among other things, an injunction barring the mergers, rescission of the mergers or rescissory damages to the extent they have already been implemented, and an award of damages and attorneys’ fees. On February 29, 2016, Plaintiff Kevin Merchant filed an amended complaint that further alleged that the February 5, 2016 preliminary proxy statement contained materially misleading statements and omissions.

On April 12, 2016, solely to avoid the costs, disruption and distraction of further litigation, and without admitting the validity of any allegations made by Plaintiff, Heartland and Global Payments reached an agreement to settle the Action. On April 12, 2016, the parties to the Action entered into a Memorandum of Understanding (the “MOU”) to document the terms and conditions for settlement of the Action. The MOU contemplates that Heartland will make certain supplemental disclosures relating to the Mergers, all of which are set forth below. Although the defendants each have denied, and continue to deny, the allegations in the Action and believe that no supplemental disclosure is required, in order to avoid the burden and expense of further litigation, Heartland agreed to make such supplemental disclosures in accordance with the terms of the MOU.

The proposed settlement of the Action is subject to confirmatory discovery and customary conditions, including court approval following notice to the Company’s stockholders. A hearing will be scheduled at which the Superior Court of Mercer County, New Jersey will consider the fairness of the proposed settlement. If the proposed settlement is finally approved by the court, it will release all claims that were or could have been brought challenging any aspect of the proposed Mergers or the Merger Agreement and any disclosure made in connection therewith, under terms that will be disclosed to stockholders before final approval of the proposed settlement. There can be no assurance that the court will approve the proposed settlement contemplated by the MOU. In such event, the proposed settlement may be terminated and the defendants would vigorously defend against the allegations in the Action.

SUPPLEMENTAL AND AMENDED DISCLOSURE

Pursuant to the MOU, Heartland has agreed to make certain supplemental and amended disclosures to the disclosures in the Proxy Statement/Prospectus, as set forth below. The Proxy Statement/Prospectus is amended and supplemented by, and should be read in conjunction with, the information set forth in this Current Report on Form 8-K. Capitalized terms used in this Current Report on Form 8-K, but not otherwise defined herein, have the meanings ascribed to those terms in the Proxy Statement/Prospectus:

1. The following supplemental disclosure hereby replaces the table on page 47 of the Proxy Statement/Prospectus in the section entitled “—Heartland Projections”:

Summary of the Projections

(dollars in millions, except per share data)

(1) Prospective financial information for 2015 was calculated prior to the end of fiscal year 2015 based upon actual results through October 31, 2015 and projections for November and December, 2015. Prospective financial information for 2015 is not reflective of actual results.

(2) For purposes of the prospective financial information, net revenue, which is not a GAAP measure, is defined as total revenue less interchange fees and card network dues, assessments and fees.

(3) Defined as operating income before processing and servicing depreciation and amortization, other depreciation and amortization and customer acquisition costs related to ordinary-course sales force compensation plans.

(4) Not adjusted to add back stock-based compensation, which is treated as a cash expense.

2. The following supplemental disclosure hereby replaces the first paragraph and the second paragraph on page 54 of the Proxy Statement/Prospectus in the section entitled “—Opinion of Greenhill & Co., LLC—Heartland Financial Analyses”:

Discounted Cash Flow Analysis. Greenhill performed a discounted cash flow analysis of Heartland by calculating the estimated present value of the standalone unlevered, after-tax free cash flows (defined as EBITDA less taxes, capital expenditures, change in net working capital and ordinary-course sale force compensation plan bonus payouts and accrued buyout liabilities) that Heartland was forecasted to generate during the fiscal years ending December 31, 2015 through December 31, 2020 based on the Heartland Forecasts. For purposes of this analysis, stock-based compensation was treated as a cash expense given its recurring nature. Greenhill calculated terminal values for Heartland by applying to Heartland’s estimated adjusted EBITDA for the fiscal year ending December 31, 2020 a selected range of EBITDA multiples of 12.0x to 13.0x. The present values (as of December 31, 2015) of Heartland’s cash flows and terminal values were then calculated using a selected discount rate range of 8.5% to 10.5% derived from a weighted average cost of capital calculation. This analysis indicated the following approximate implied per share equity value reference range for Heartland, as compared to the implied per share merger consideration:

Premiums Paid Analysis. Greenhill performed an analysis of the premiums paid in (i) 65 selected mergers and acquisition transactions involving acquisitions of U.S. publicly-traded target companies, (ii) 56 selected mergers and acquisition transactions involving acquisitions of U.S. publicly-traded target companies by strategic buyers, (iii) 40 selected mergers and acquisition transactions involving acquisitions of U.S. publicly-traded target companies for all-cash consideration and (iv) 17 selected mergers and acquisition transactions involving acquisitions of U.S. publicly-traded target companies for cash and stock consideration, in each case announced during the five-year period ended December 14, 2015 involving target companies with approximate enterprise values of $3 billion to $5 billion based on closing stock prices of the target companies involved in such transactions one trading day, five trading days and 30 trading days prior to public announcement of the relevant transactions. Financial data of the selected mergers and acquisition transactions were based on publicly available information.

3. The following supplemental disclosure hereby replaces the third paragraph and the fourth paragraph on page 55 of the Proxy Statement/Prospectus in the section entitled “—Opinion of Greenhill & Co., LLC—Global Payments Financial Analyses”:

Discounted Cash Flow Analysis. Greenhill performed a discounted cash flow analysis of Global Payments by calculating the estimated present value of the standalone unlevered, after-tax free cash flows (defined as EBITDA less taxes, capital expenditures and change in net working capital) that Global Payments was forecasted to generate during the fiscal years ending May 31, 2016 through May 31, 2020 based on public filings, publicly available information and the Global Payments Forecasts. For purposes of this analysis, stock-based compensation was treated as a cash expense given its recurring nature. Greenhill calculated terminal values for Global Payments by applying to Global Payments’ estimated adjusted EBITDA for the fiscal year ending May 31, 2020 a selected range of EBITDA multiples of 13.5x to 14.5x. The present values (as of May 31, 2015) of Global Payments’ cash flows and terminal values were then calculated using a selected discount rate range of 7.5% to 9.5% derived from a weighted average cost of capital calculation. This analysis indicated the following approximate implied per share equity value reference range for Global Payments, as compared to the closing stock price of Global Payments common stock on December 14, 2015:

Other Information. Greenhill noted certain additional information that was not considered part of Greenhill’s financial analyses with respect to its opinion but was referenced for informational purposes, including, among other things, the following: