Shares of Global Payments (GPN) fell almost 2% on Wednesday after it announced its intent to acquire Accelerated Payment Technologies. The all cash deal values the company at $413 million.
Global Payments announced that it will acquire Accelerated Payment Technologies in an all cash transaction, valuing the firm at $413 million. Accelerated Payment provides fully integrated payment solutions for small and medium sized businesses. Those businesses produced $8 billion in annual card volume. Accelerated has a network of 700 re-sellers across a range of markets.
Global Payments' Chairman and CEO Paul Garcia commented on the deal, "Over the course of our longstanding relationship with APT, we have been impressed with the quality and growth of their payment technology solutions. APT serves merchants from attractive growth verticals such as the dental, medical, pharmacy, specialty retail, automotive and veterinary markets."
Accelerated Payment Technologies is currently owned by private equity firm Great Hill Partners. Both companies expect to close the deal by the second quarter of 2013.
Global Payments currently already processes the majority of Accelerated Payment Technologies' transactions. Therefore the acquisition is not expected to materially impact the firm's revenues. While the deal will be neutral on a cash basis, the impact will be dilutive to earnings per share in the fiscal year of 2013.
Global Payments reported its full year results for 2012 on July the 26th. For the full year, the company reported annual revenues of $2.2 billion. Net income attributable to shareholders came in at $188 million, or $2.37 per share. The company operates with $781 million in cash and equivalents. It has $528 million of debt and lines of credit outstanding, for a net cash position of $253 million.
The market values the firm at $3.3 billion. This values the operating assets of the firm at 1.4 times annual revenues. Global Payments is valued at 16 times annual earnings.
Currently, Global Payments pays a quarterly dividend of merely $0.02 per share, for an annual dividend yield of 0.2%.
Shares of Global Payments have fallen 12% so far this year. Shares rose steadily in the first three months of this year. Shares fell almost 10% in the beginning of April, after the company announced that it had experienced security breaches within its payment processing systems.
Shares fell to $45 after the announcement of the security breach. From that point in time, shares traded within a $40-$45 price range as there were few triggers causing a move in the company's shares.
Over the past five years, shares returned about 15%, trading within the $30-$55 price range. At the same time, the company boosted its annual revenues from $1.5 billion in 2009 to $2.2 billion in 2012. Earnings lagged revenue growth, as diluted earnings per share grew from $2.10 to $2.37 over that time period.
Investors, including myself, are not impressed with the recent acquisition. The sizable acquisition, valued at 13% of Global Payments' current market capitalization, is sizable and investors have not been given much information. The company announced that the acquisition is dilutive to full year earnings, something not applauded by investors.
Investors send shares 2% lower on Wednesday, the day of the announcement of the acquisition. I see few to none upside triggers for the short to medium term.
I remain on the sidelines.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.