Fiserv Prices Senior Notes

Recently, Fiserv, Inc. ( FISV - Analyst Report ) declared the pricing of its senior notes offering of principal amount $700 million, due to mature in 2022. The senior notes carry an interest rate of 3.500%.

The company expects the offering to be completed by September 25, 2012, upon the fulfillment of certain customary conditions. Book-running managers currently acting for this notes offering are Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, Mitsubishi UFJ Securities (USA), Inc. and U.S. Bancorp Investments, Inc.

The net proceeds from the offering shall be used to repay a part of the company’s term loan facility, which is due to mature in November 2012.

The company exited the second quarter of 2012 with cash and cash equivalents of $302 million, decreasing from $311 million at the end of the previous quarter. Long-term debt remained somewhat consistent at $3.2 billion compared with the previous quarter. Year-to-date, net cash provided by operating activities amounted to $385 million with free cash flow of $298 million (net capital expenditures being $102 million).

For the full year 2012, management projects an annual adjusted revenue growth of 4%–6% and adjusted internal revenue growth of 3.0% – 4.5%. Adjusted earnings per share are likely to be in the range of $5.08 – $5.20, representing a yearly growth of 11%–14%.

The company’s primary competitors include big players such as Mastercard Incorporated ( MA - Analyst Report ) , Fidelity National Information Services, Inc. ( FIS - Analyst Report ) and Total System Services, Inc. ( TSS - Analyst Report ) . Moreover, Fiserv faces an ongoing threat from billers and self-sufficient financial institutions that develop and use their own electronic payment transactions and Internet banking solutions.

We have a Neutral recommendation on Fiserv. The stock retains a Zacks# 3 Rank (‘Hold’ rating in the short term).