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First Data files for IPO, again

July 21, 2015 - strategy
First Data files for IPO, again

First Data filed for IPO yesterday. Currently owned by KKR who invested additional $1.2b last year in the hopes FD would create additional value via analytics and cyber security. They reported $112m losses on $2.7b sales in the first three months of 2015. Interest expense alone was $407m (less than 2014’s $467m for the same period) on $34b total assets ($10.2b current assets). With the IPO they are trying to raise $100m in funding to help service its $21b debt (according to the filing).

Traditional payments incumbents are threatened by quick pace of innovation in payments space and KKR is probably not keen on continuing to inject capital in the company. Innovations such as Bitcoin and Dwolla have the opportunity to dis-intermediate First Data and competitors (i.e. TSYS, Chase, Fidelity) but it is still too early to tell the impact. In the S-1 filing Frank Bisagano, CEO of First Data, articulates some thoughts on innovation:

Our pipeline of innovations—webstore-in-a-box solutions, virtual gift card capabilities, solutions for alternative lenders, next-generation network fraud solutions, among others—are just beginning to enter the market

Here is the full list, according to the S-1.

 

We acquired Clover, an open architecture, integrated POS operating system, in December 2012. At the time of acquisition, Clover had less than a dozen employees, none or only partially developed software, hardware options, and distribution strategy. Since then, we have grown Clover to 53 engineers, launched three versions — Clover Station, Clover Mobile andClover Mini — and built a robust open architecture platform that can service a broad array of business clients. Within Clover, we also offer a cloud-based Clover App Market for business applications.

 

 

Gyft—a leading digital platform that enables consumers to buy, send, manage, and redeem gift cards using mobile devices. Gyft’s capabilities, combined with our long-standing experience in prepaid solutions, create a distinct combination in a rapidly growing market for virtual gift cards. Additionally, in October 2014 Gyft became the first gift card solution to enable consumers to buy virtual gift cards with Apple Pay’s in-app payment functionality.

 

For reference, here is a picture of First Data’s payment processing value chain.

payment-processing

One hypothesis would be they took too much debt when it was cheap and now are struggling to service it. Here is Kravis talking about his thoughts on using capital markets for fundraising.

Source: First Data files for IPO – Fortune