Fidelity National approached Global Payments about a merger

US equity markets have been winding down for the holidays this week but one story has got tongues or should that be messaging applications wagging before traders power down for a few days of RnR.

The Wall Street Journal reported that Fidelity National Information Services and fellow S&P 500 constituent Global Payments had been in discussion about a possible $70.0 billion merger between the two businesses.

A deal that combined the two would unite Fidelity National payments brands such as World Pay with Global Payments solutions which are used by 3.50 million businesses worldwide in areas such as point of sale, mobile, online and even IOT or internet of things payments solutions.

In Q3 2020 Global Payments Inc reported revenues of $1.918 billion some $800 million higher than the figure for Q3 21019 which meant that EPS rose to 74 cents per share compared to the 54 cents seen in Q3 2019.

Rival Fidelity National reported Q3 2020 revenues of $3.20 billion up 13% year over year though earnings per share came in flat at a $1.42. Much of that growth in revenues, however, wasn’t organic and came from the recent acquisition of World Pay. It seems as though Fidelity National was keen to continue to grow via M&A activity.

However, overtures made to Global Payments seem to have fallen at the last hurdle. Talks were said to be at an advance stage with an announcement about a deal being discussed by both sides however, the talking suddenly stopped for an as-yet-undisclosed reason.

A deal between the two companies would be welcomed on Wall Street not least because it would have represented the largest piece of M&A in 2020 but also because it would help to crystalise valuation in the global payments space at the highest level. Analysts have been broadly positive about the notion of a deal even if it’s unlikely to consummated just yet, with neither side in a hurry to return to the negotiating table for now according to the Journal story.

A deal of this size between two of the largest players in the electronic payments space would face hurdles of course not least over the question of antitrust violations in the USA.

If the merger talk can be rekindled this could be an early test of the Biden administration’s handling of key business issues. Antitrust or monopoly issues have come front and centre in the US in recent weeks with both Google and Facebook being taken to task by Federal and State prosecutors about a lack of competition in key markets because of their dominant positions.

Barons magazine has suggested the street would like to see Fidelity International snap up Global Payments Inc at the $70 billion dollar mark which would be the equivalent of an enterprise value to EBITDA ratio of 13 to 14 times. That valuation could rise to 15 or 16 times if the deal could be completed in cash and equity without the need for debt issuance.

Those are the kind of numbers to make even the most hardened VC sit up and take note and if merger talks fail to restart and Fidelity national rules out making a hostile approach for Global Payments. Then both sides could be on the lookout for any acquisition opportunities available in the private markets.