Global Payments Inc. (GPN - Free Report) has completed the acquisition of the communities and sports divisions of ACTIVE Network, which provides cloud-based, mission-critical enterprise software solutions to event organizers.
The deal was funded in cash-and-stock. The company used its revolving credit facility to fund the cash consideration of $600 million.
This acquisition will be highly complementary to Global Payments’ gaming business and will expand its existing suite of innovative products and solutions. For the third quarter of 2017, the company expects ACTIVE Network to contribute revenues in the range of nearly $13 million to $14 million but have no impact on earnings.
Global Payments is riding high on inorganic growth. The leading provider of merchant acquiring and payment technology services has successfully closed a number of acquisitions along with several alliances and joint ventures in the past. These led to a revenue CAGR of 12.5% between 2006 and 2016.
One of its major acquisitions was that of Heartland Payment Systems, valued at $3.9 billion (closed last year), in its North America segment. The deal accelerated growth by broadening Global Payments’ direct distribution channels in the United States and enhancing its vertical markets exposure.
Its other recent successful acquisitions include the assets of FIS Gaming Business, Pay and Shop Limited, Ezidebit, PayPros and eWay.
Year to date, the company’s shares have returned 36%, significantly outpacing the 24% gain by the industry it belongs to. The outperformance reflects the company’s strong growth, efforts to deleverage its balance sheet and value accretion.
These buyouts have of course expedited growth for Global Payments. However, these have increased its debt burden, causing a spike in interest expenses that put pressure on margins.
The payments industry continues to grow worldwide, presenting unique opportunities for the company to expand operations globally by pursuing acquisitions and creating alliances and joint ventures. The company actively seeks profitable deals and we therefore expect to hear more on these lines from the company in the near future.
Zacks Rank and Stocks to Consider
Global Payments carries a Zacks Rank #3 (Hold). Some better-ranked players in the same segment are Green Dot Corp. (GDOT - Free Report) , Vantiv, Inc. and Western Union Co. (WU - Free Report) . While Green Dot sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Green Dot has been witnessing upward estimate revisions for the last 30 days. In a year, the company’s share price has risen more than 99%.
Vantiv has been witnessing upward estimate revisions for the last 30 days. Further, the stock has surged nearly 35.1% in the last 12 months.
Western Union has seen upward estimate revisions for the last 30 days. It beat estimates in two of the last four quarters, with an average positive surprise of 4%.
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