ATLANTA, June 17 /Xinhua-PRNewswire/ -- Global Payments Inc. (NYSE: GPN), a leading provider of electronic transaction processing solutions, announced today it has agreed to form a joint venture with HSBC Bank plc ("HSBC") to provide payment processing services to merchants in the United Kingdom and Internet merchants globally. The new company will operate under the name HSBC Merchant Services.
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HSBC Bank plc is a wholly owned subsidiary of HSBC Holdings plc (LSE: HSBA), one of the largest financial services institutions in the world, with assets of approximately $2.4 trillion and approximately 10,000 offices in 83 countries and territories, as of December 31, 2007. In the United Kingdom, HSBC Bank estimates that its merchant acquiring business commands an approximate 15 percent market share by providing payment card processing services across 135,000 merchant outlets.
"We are thrilled that HSBC, one of the world’s most respected financial institutions, has agreed to expand its relationship with Global Payments into the United Kingdom," said Chairman, President, and Chief Executive Officer of Global Payments, Paul R. Garcia. "We expect to focus on growing the customer base by providing an expansive range of card payment solutions. Longer-term, with the adoption of the Single Euro Payments Area (SEPA) initiatives, we expect to be in an excellent position to provide seamless acquiring services to merchants throughout Europe," Garcia continued.
"The creation of HSBC Merchant Services builds on our partnerships with Global Payments in Asia and North America," said Group General Manager Commercial Banking, Alan Keir. "Through the combination of HSBC’s extensive business customer franchise, and Global Payments’ experience in transaction handling, HSBC Merchant Services will offer a compelling proposition," added Keir.
"We are pleased to be joining a leading provider of electronic payment processing solutions. Being a part of a strong company that understands our business will be welcomed by our merchant customers and provide new opportunities for our 400 employees," said Head of Card Acquiring for HSBC, Darren Wilson.
Under the terms of the agreement, and pending regulatory approvals and customary closing conditions, Global Payments will pay HSBC $439 million in cash to acquire a 51 percent majority ownership in the joint venture. HSBC will control the remaining 49 percent and will contribute its existing merchant acquiring business in the United Kingdom to the joint venture. In addition, the bank has agreed to a ten-year marketing alliance in which HSBC will refer customers to the joint venture for payment processing services in the United Kingdom. The transaction is expected to be completed within two months.
For the calendar year 2007, HSBC’s merchant acquiring business in the United Kingdom generated revenue of approximately $229 million (114 million pounds Sterling). Global Payments expects the transaction to be accretive to diluted earnings per share in the first year following the close of the transaction. Global Payments’ management will discuss this acquisition during its fiscal 2008 year-end earnings call in July 2008. Please refer to the attached fact sheet for further details. The company has also posted a slide presentation relating to this transaction under the Investor Relations section of its Web site at http://www.globalpaymentsinc.com .
Global Payments Inc. (NYSE: GPN) is a leading provider of electronic transaction processing services for consumers, merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies and multi-national corporations located throughout the United States, Canada, Latin America, Europe and the Asia-Pacific region. Global Payments offers a comprehensive line of processing solutions for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management. The company also provides consumer money transfer services from the United States and Europe to destinations in Latin America, Morocco, and the Philippines. For more information about the company and its services, visit http://www.globalpaymentsinc.com .
This announcement by Global Payments’ may contain certain forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue and earnings estimates and management’s expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include the following: continued certification by credit card associations, foreign currency risks, competition and pricing, product demand, market and customer acceptance, development difficulties, the effect of economic conditions and consumer spending, security breaches or systems failures, costs of capital, changes in state, federal or foreign laws and increases in credit card association fees, utility or system interruptions, the ability to consummate and integrate acquisitions, and other risks detailed in the Company’s SEC filings, including the most recently filed Form 10-Q or Form 10-K, as applicable. The Company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.
Fact Sheet
Global Payments Inc. and HSBC Bank plc Form Strategic Joint Venture in the United Kingdom
Transaction Summary
Global Payments Inc. ("Global") has agreed to form a joint venture with HSBC Bank plc ("HSBC") to provide payment processing services to merchants in the United Kingdom and Internet merchants globally. The new company will operate under the name HSBC Merchant Services. As part of the agreement, HSBC will contribute its existing merchant acquiring operations and merchant base in the United Kingdom (UK). Global intends to use its existing excess cash, a new term loan among a syndicate of U.S. banks, and a portion of its existing U.S. line of credit (as needed) to pay HSBC $439 million for a 51 percent stake in the joint venture, with HSBC controlling the remaining 49 percent. Global will have three seats on the joint venture’s Board of Directors and HSBC will have two seats. In addition, HSBC has agreed to a ten-year marketing alliance in which the bank will refer customers to the joint venture for payment processing services. The transaction is subject to regulatory approvals and customary closing conditions and is expected to be completed within two months.
HSBC Bank plc Merchant Acquiring
We believe HSBC’s merchant acquiring business in the United Kingdom commands a market share of approximately 15 percent, providing payment card processing services to over 135,000 merchant outlets. Its merchant portfolio includes 20 of the UK FTSE 100 Index companies, as well as smaller merchants in a variety of vertical markets, such as retail, restaurant, travel and entertainment, insurance, utilities and business services. The merchant acquiring division has a staff of 400 employees and is operated by a seasoned management team. It is anticipated that the majority of these employees will join Global Payments.
The United Kingdom Payment Card Market
The United Kingdom is one of the most established credit and debit card markets in Europe and worldwide. In 2007, approximately 354 billion pounds was spent on plastic cards -- 221 billion pounds from 4.9 billion debit card transactions and 133 billion pounds from 1.9 billion credit card transactions. 42 million, or 84 percent of the adult population, held a debit card and 31 million, or 62 percent of the adult population, held a credit or charge card. In all, there were 165 million payment cards in issue -- 72 million debit cards, 67 million credit cards, 6 million charge cards, 20 million ATM-only cards and 0.5 million check guarantee cards. On a payment card per capita basis, the United Kingdom had 2.4 credit cards per person and 1.6 debit cards per person.
In the past decade, growth in the United Kingdom card industry has been fueled by consumers’ preference to switch to card payments from the more traditional payment methods, such as cash and checks. Cash as a proportion of consumer spending declined from 39 percent in 1996 to 26.5 percent in 2006. As a result, check usage also declined significantly, from 29 percent of total consumer spending in 1996 to 16 percent in 2006. This rate of decline was faster than in the United States, in part due to an increasing number of United Kingdom merchants electing to no longer accept checks, or placing heavy restrictions on their usage. In addition to a general shift to electronic payments, the United Kingdom has experienced strong growth in Internet transactions. According to APACS, the United Kingdom payments association, Internet card payments increased nearly four-fold over the last five years to 34 billion pounds in 2007.
Growth Opportunities
A strategic joint venture between Global and HSBC has a number of growth opportunities. The immediate priority will be to implement a number of key direct sales initiatives, including the targeting of specific merchant segments, enhancing sales force training, introducing additional sales force automation tools, and using a more focused sales approach. Additionally, the joint venture plans to capitalize on the significant investment HSBC has made in developing a global solution for handling Internet-based transactions. Due to HSBC’s extensive worldwide footprint, the joint venture will have the capability to provide Internet-based merchant acquiring services in at least 37 countries and 35 currencies.
Over the long term, the joint venture intends to position itself for growth throughout Europe with the adoption of the Single Euro Payments Area (SEPA) initiatives. Many European countries have been restricted to competition due to proprietary debit schemes. It is expected that those constraints will be lifted with the adoption of SEPA.
Other growth opportunities include the introduction of new products and services, including those that may be common in the United States, such as online merchant statements, but that are less common throughout Europe.
Competitive Advantages
In the United Kingdom, the joint venture will primarily compete against national banks offering merchant acquiring services. As such, among the most compelling competitive advantages of the joint venture are strong attributes both parties bring to the joint venture. Global’s singular focus and expertise in electronic transaction processing, the experience and leadership of Global’s executive management team, the combined resources of HSBC and Global, the value of the HSBC brand and the bank’s market position and local knowledge strategically position the joint venture to effectively compete in the second largest payments market in the world. Further, the ten-year marketing alliance agreement will provide the joint venture with merchant referrals from HSBC’s branches and affiliates in the United Kingdom.
Financial Impact
For the calendar year 2007, HSBC’s merchant acquiring business in the United Kingdom generated revenue of approximately $229 million (114 million pounds). Global expects the transaction to be accretive to diluted earnings per share in the first year following the close of the transaction. Over the long term, Global anticipates strong revenue growth and earnings accretion from this transaction as the joint venture further penetrates the United Kingdom and other countries in Europe. Global Payments’ management will discuss this acquisition during its fiscal 2008 year-end earnings call in July 2008.
About HSBC Bank plc
HSBC Bank plc is a wholly-owned subsidiary of HSBC Holdings plc (LSE: HSBA), one of the largest banking and financial services institutions in the world, with established businesses in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. The HSBC Group services approximately 128 million customers worldwide with 330,000 employees located throughout 10,000 offices in 83 countries and territories. At December 31, 2007, HSBC Holdings plc held assets of $2.4 trillion. HSBC Holdings is listed on the London, Hong Kong, New York, Paris, and Bermuda stock exchanges. Shares of HSBC Holdings are held by more than 200,000 shareholders in over 100 countries and territories.
About Global Payments Inc.
Global Payments Inc. (NYSE: GPN) is a leading provider of electronic transaction processing services for consumers, merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies, gaming establishments, and multi-national corporations located throughout the United States, Canada, Latin America, Europe and the Asia-Pacific region. Global Payments offers a comprehensive line of processing solutions for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management. The company also provides consumer money transfer services from the United States and Europe to destinations in Latin America, Morocco, and the Philippines. For more information about the company and its services, visit http://www.globalpaymentsinc.com .
This fact sheet by Global Payments’ may contain certain forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue and earnings estimates and management’s expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include the following: continued certification by credit card associations, foreign currency risks, competition and pricing, product demand, market and customer acceptance, development difficulties, the effect of economic conditions and consumer spending, security breaches or systems failures, costs of capital, changes in state, federal or foreign laws and increases in credit card association fees, utility or system interruptions, the ability to consummate and integrate acquisitions, and other risks detailed in the Company’s SEC filings, including the most recently filed Form 10-Q or Form 10-K, as applicable. The Company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.
Sources: APACS, The UK Payments Association, available from http://www.apacs.org.uk/index.html; Internet; accessed 09 May 2008. "The rise of the plastic generation." http://www.vrlknowledgebank.com .
