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Total System Closes Cayan Buyout to Boost Merchant Business

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Total System Services Inc. (TSS - Free Report) has closed the previously announced acquisition of Cayan, a payment technology company focused on integrated payment solutions and merchant acquiring.

The all cash transaction valued at nearly $1.05 billion, will only be slightly accretive in 2018.

A Strategic Fit

Cayan is a perfect complement for Total System’s merchant business. The deal is likely to strengthen Total System’s position as a leading technology payments provider to small and medium size businesses in the United States.

In fact, Cayan enables payments in physical stores and mobile locations as well as e-commerce to more than 70,000 merchants and higher than 100 integrated partners in the United States. It clients vary in size from large-scale chains to small, one-location businesses. Also, the company supports businesses of all industries including restaurants and retail.
Notably, Cayan ranks among the largest merchant acquirers in the United States and is one of the early adopters of EMV technology.

Total System will benefit from Cayan’s payment and payment processing solutions for online and brick-and-mortar retailers as well as point-of-sale (POS) developers, value-added resellers (VARs) and agents. Moreover,  Cayan’s product line that centers around its Genius platform, which exists in countertop, handheld, and mobile attachment forms, will provide an additional payment gateway to Total System.

Inorganic Growth Profile

Total System has grown significantly over the years through a number of strategic acquisitions. NetSpend buyout in July 2013 was a notable one. This acquisition made Total System one of the largest program managers of dollars reloaded in prepaid cards, thereby enhancing its footprint in the U.S. prepaid card industry and bolstering long-term growth through a diversified portfolio. In Apr 2016, Total System acquired TransFirst, a major U.S. merchant solutions provider, which enhanced its technology, scale, and distribution capabilities.

In the first quarter of 2017, Total System completed the purchase of an additional 10% ownership of the Central Payment Joint Venture brining the company’s ownership level to 85%. Meanwhile, the company continues to benefit from its long-term processing contracts as it focuses on retaining and acquiring clients.

Share Price Performance

Total System has gained 54% in a year’s time, outperforming the industry’s growth of 38%.

Zacks Rank and Stocks to Consider

Total System carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Envestnet, Inc. (ENV - Free Report) , American Express Co. (AXP - Free Report) and FleetCor Technologies, Inc. (FLT - Free Report) . While Envestnet and American Express sport a Zacks Rank #1 (Strong Buy), FleetCor Technologies has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Envestnet beat estimates in each of the trailing four quarters with an average positive surprise of 4.2%.

American Express surpassed estimates in three of the trailing four quarters with an average positive surprise of 0.07%.

FleetCor Technologies beat estimates in each of the trailing four quarters with an average positive surprise of 2.5%.

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