Barclays on GPN/TSS: EU Financial Dislocation Presents Opportunity for U.S. Merchant Acquirers
Tweet
Share
E-mailGet Alerts STD Hot Sheet
Price: $6.10 +0.83%
Rating Summary:
3 Buy, 5 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
Rating Summary:
3 Buy, 5 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
Join SI Premium – FREE
Barclays on GPN/TSS: EU Financial Dislocation Presents Opportunity for U.S. Merchant Acquirers
Barclays analyst said, "According to the European Banking Authority's (EBA) recent recommendation published on December 8th, there is a capital shortfall of EUR114 billion within the European banking system. Seven of the banks listed by the EBA also have top-ranked European merchant acquiring platforms (banks with capital shortfalls named by the EBA and the top 40 European merchant acquirers are listed below). Given that merchant acquiring and other payments processing assets are often considered non-core by parent banks, we suspect these assets may be considered for divestiture to assist in capital raising plans. With a number of examples from the past five years (i.e., FNBO, Vantiv, Metavante, WorldPay) where merchant acquiring assets were monetized for capital raising purposes, we believe the financial dislocation in Europe may present an opportunity for U.S. and other large multinational merchant acquirers to grow through acquisition of, or JVs with, some of these businesses. In particular, GPN and TSS have both suggested an interest in pursuing further global expansion, and we believe both companies' capital structures offer compelling potential. We view this as an opportunity worth watching given the generally accretive nature of most deals in the merchant acquiring space."
"Seven banks that are currently undercapitalized (according to EBA) that also have merchant acquiring arms include: Banco Santander (NYSE: STD), Banco Bilbao (Nasdaq: BBVA), BPCE, Societe Generale, Banco Popular, BNP Paribas, and Erste Group Bank AG."
"Total System (NYSE: TSS): TSS has cash on the balance sheet of $281 million, expects to generate roughly $275-300 million in free cash flow during 2012, and is only 0.6x levered (versus LTM EBITDA). Management suggested potential to lever up to 2.5-3.0x LTM EBITDA (would add ~ $1.0 to $1.5 billion of incremental debt versus current leverage ratio) to pursue acquisitions."
"Global Payments (NYSE: GPN): With the majority of GPN's cash generated outside the U.S., the company has recently indicated that it continues to look for opportunities to expand its business internationally (likely taking a similar approach to the joint venture recently formed between GPN and "la Caixa" in Spain). Management has recently suggested a willingness to increase its leverage ratio to 2.5x LTM EBITDA of ~$400 million (vs. ~1.75x currently) for potential future acquisitions."
Barclays analyst said, "According to the European Banking Authority's (EBA) recent recommendation published on December 8th, there is a capital shortfall of EUR114 billion within the European banking system. Seven of the banks listed by the EBA also have top-ranked European merchant acquiring platforms (banks with capital shortfalls named by the EBA and the top 40 European merchant acquirers are listed below). Given that merchant acquiring and other payments processing assets are often considered non-core by parent banks, we suspect these assets may be considered for divestiture to assist in capital raising plans. With a number of examples from the past five years (i.e., FNBO, Vantiv, Metavante, WorldPay) where merchant acquiring assets were monetized for capital raising purposes, we believe the financial dislocation in Europe may present an opportunity for U.S. and other large multinational merchant acquirers to grow through acquisition of, or JVs with, some of these businesses. In particular, GPN and TSS have both suggested an interest in pursuing further global expansion, and we believe both companies' capital structures offer compelling potential. We view this as an opportunity worth watching given the generally accretive nature of most deals in the merchant acquiring space."
"Seven banks that are currently undercapitalized (according to EBA) that also have merchant acquiring arms include: Banco Santander (NYSE: STD), Banco Bilbao (Nasdaq: BBVA), BPCE, Societe Generale, Banco Popular, BNP Paribas, and Erste Group Bank AG."
"Total System (NYSE: TSS): TSS has cash on the balance sheet of $281 million, expects to generate roughly $275-300 million in free cash flow during 2012, and is only 0.6x levered (versus LTM EBITDA). Management suggested potential to lever up to 2.5-3.0x LTM EBITDA (would add ~ $1.0 to $1.5 billion of incremental debt versus current leverage ratio) to pursue acquisitions."
"Global Payments (NYSE: GPN): With the majority of GPN's cash generated outside the U.S., the company has recently indicated that it continues to look for opportunities to expand its business internationally (likely taking a similar approach to the joint venture recently formed between GPN and "la Caixa" in Spain). Management has recently suggested a willingness to increase its leverage ratio to 2.5x LTM EBITDA of ~$400 million (vs. ~1.75x currently) for potential future acquisitions."
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Berenberg Starts Lloyds TSB Group (LYG) at Hold, 'shares are fairly valued'
- MarineMax (HZO) PT Lowered to $35 at Stifel
- Comcast Corp (CMCSA) PT Lowered to $48 at Pivotal Research
Create E-mail Alert Related Categories
Analyst CommentsRelated Entities
BarclaysSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
