Bernstein: Potential Global Payments acquisition feasible, but large equity funding needs and revenue risks limit premium

How far has the potential acquisition progressed?

According to the Financial Times, private equity firm CD&R is seeking to acquire Global Payments (GPN) and has joined forces in its bid with GTCR, its largest shareholder, which holds a 15.45% stake; talks are ongoing.
Bernstein believes a deal is possible, particularly if existing debt can be retained. However, uncertainty over GPN’s revenue outlook could limit the premium buyers are willing to pay.

Bernstein estimates that if GPN achieves annual revenue growth in the low single-digit percentages, buyers could pay a 20%–30% premium to the pre-report share price and earn an acceptable return.
The calculation also depends on two cost reductions: the existing transformation plan delivering 650 million dollars in annual recurring savings by the first half of 2027, and approximately 600 million dollars in cost synergies within three years of the Worldpay deal closing, as guided by management. Bernstein believes synergy savings could be higher.
There are also risks to revenue: GPN faces intense competition in both the small and medium-sized merchant and e-commerce segments, and buyers would need to achieve cost savings while taking on these risks.

At the share price on the Thursday before the news emerged, GPN had an enterprise value of approximately 44 billion dollars, comprising 22 billion dollars in equity value and 22 billion dollars in debt. Bernstein estimates that even if GTCR rolls its existing stake into the deal, the two buyers would still need to contribute more than 23 billion dollars in equity, assuming only a small amount of additional debt is raised to maintain the existing rating.
The existing debt has a weighted-average interest rate of just 4.03%, with maturities extending to 2052. Bernstein believes that, provided the existing rating is maintained, a change of control alone is unlikely to trigger refinancing of 15.5 billion dollars in senior notes, so the treatment of the debt will affect the deal’s feasibility.

Bernstein believes a potential GPN deal could increase takeover premiums for peers. On expected 2027 price-to-earnings ratios, GPN, Fiserv and FIS trade at approximately 5–6 times; after accounting for high leverage and multiple earnings adjustments, their adjusted enterprise value to after-tax operating profit ratios are approximately 10, 11 and 12 times, respectively.
However, the firm believes a deal for GPN is relatively easier to complete: Fiserv and FIS require more substantial operational transformations and lack the advantage of a GTCR-like rollover of existing equity and readily achievable cost synergies; their banking businesses also require them to maintain investment-grade ratings.
Bernstein is also watching whether PayPal will attract other buyers, citing its ability to generate free cash flow and the value of its two-sided network. The firm rates GPN, Fiserv, FIS and PayPal Market Perform.