FTV Capital return on CardConnect stake said to be 6x to 7x overall

FTV Capital is expected to make 6x to 7x its money with the sale of its remaining stake in CardConnect, a source said.

First Data Corp said May 29 that it agreed to buy CardConnect for $15 a share, or about $750 million, including debt. CardConnect, King of Prussia, Pennsylvania, processes about $26 billion worth of bank-card payments annually for 67,000 merchants. In 2016 the company produced adjusted EBITDA of $38 million on $156 million revenue.

CardConnect is a longtime First Data distribution partner; the acquisition is expected to close in the third quarter.

Last year, FinTech Acquisition acquired CardConnect, an FTV portfolio company, for $438 million. FTV retained roughly one-third of CardConnect that it filed to sell in a secondary offering, according to an SEC filing dated April 24. It’s unclear when talks with First Data began, but executives on a conference call Tuesday said the two companies have known each other for a long time. “We’ve been talking about how to work together for several years,” a First Data executive said.

“We are very pleased for the CardConnect team and for FTV’s limited partners,” said Karen Derr Gilbert, FTV’s spokeswoman, in an emailed response to questions.

The acquisition of CardConnect is also the biggest for First Data since it went public in 2015, the New York Times said. KKR acquired First Data, of Atlanta, in 2007 for $29 billion, one of the largest LBOs to occur before the financial crisis.

First Data struggled for many years under its debt load of more than $20 billion. Its rebound began after it hired former JPMorgan Chase & Co executive Frank Bisignano in 2013 as CEO. The company handles $2.2 trillion of transactions a year for customers including retailers and banks, CNBC said.

KKR still owns about one-third, or 29 percent, of First Data between its fund and balance sheet, a KKR spokeswoman said.

A First Data executive said on the call that the company remains focused on deleveraging but it will do “smart deals along the way.” One of those is CardConnect, which is expected to be modestly accretive, executives said. First Data’s long-term debt stood at $18.7 billion as of March 31, SEC filings show.

“CardConnect was a very unique transaction in that it fit in with a series of things we had on our drawing board and the partnership we had,” said Bisignano on the conference call. He added that he plans to “personally oversee” CardConnect’s integration.

Allen & Co provided financial advice to First Data, while Weil, Gotshal & Manges was its legal adviser. Financial Technology Partners served as financial adviser to CardConnect, while Wachtell, Lipton, Rosen & Katz was legal adviser.

Executives for CardConnect and First Data could not be reached for comment.

Action Item: Contact CardConnect CEO Jeffrey Shanahan: +1 484-581-2200

First Data Chairman and Chief Executive Frank Bisignano (center) rings the bell to signal the start of trading after his company’s IPO on the New York Stock Exchange on Oct. 15, 2015. Photo courtesy Reuters/Brendan McDermid