First Data IPO?

(By Richard Holway 4.00pm Sunday 2nd August 09) The article - KKR eyes market blitz of up to six IPOs – in Saturday’s FT suggested that First Data was set for an IPO soon. You might be interested in the HotViews note I wrote over two years back on 2nd Apr 07 (our online archives don't stretch back that far yet).

2nd Apr 07

First Data in $27b private equity cash buyout

Throughout most of the years of writing the annual Holway Report, I always featured First Data in the Top Ten of Global IT services companies by revenue. When I started in computing, back in 1966, our industry was dominated by computer processing bureaux like Baric, Centrefile, Datasolve etc. First Data is a computer bureau specialising in electronic payments - mainly credit card payments. Formed way back in 1971, Amex took an 80% stake in 1980 and went public after it was spun out in 1992. First Data merged with Concord EFS in a $6.6b deal in 2004.Anyway, enough of the history lesson.

Tonight First Data accepted a $27b CASH buyout from US private equity company Kohlberg Kravis Roberts (KKR). The bid is a 21% premium to FD's share price before the bid. Not a bad price either given that FD had revenues of $7.1b and Nett profits of $848m in FY 2006.This is the biggest ever private equity deal in our sector. Indeed, it is only just behind the $32b buyout of TXU; which will be the biggest if that deal is consummated. It dwarfs the $5.9b ACS Private Equity deal announced last week or the biggest of all, until today, Sungard (March 2005 valued at $11.3b). So now there really is no global IT services company "out of bounds" to Private Equity who are clearly "on a roll". Watch out EDS and CSC. Your turn next!

Well, it didn’t work out quite like that! But I think the history books will reveal that it was a close run thing with CSC and, of course, HP got EDS instead. Big leverage buy outs went out of fashion. Indeed some of you will have heard that Henry Kravis said that now the ‘Leverage’ bit of LBOs had disappeared all he was left with now was BO! But before the L bit disappeared, KKR did do other deals in our sector – most relevant for us was their £593m Northgate IS deal in Dec 07.

It will be very interesting to see how much First Data will fetch. I doubt $27b!