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Tue, Apr 03, 2007 - Page 10 News List

KKR set to acquire leading credit-card processor First Data

BLOOMBERG

Kohlberg Kravis Roberts & Co agreed to acquire First Data Corp, the world's largest processor of credit-card payments for banks and merchants, for approximately US$29 billion.

KKR will pay US$34 a share in cash for First Data, 26 percent more than its closing price last Friday, the companies said in a statement yesterday. It represents the second-largest announced leveraged buyout ever by equity value after the proposed purchase of TXU Corp and the biggest by a single firm, data compiled by Bloomberg showed.

First Data's board, led by CEO Henry Duques, decided to sell the Greenwood Village, Colorado- based company seven months after spinning off its Western Union money-transfer unit and struggling to increase earnings. KKR has now unveiled plans to spend more than US$75 billion on acquisitions since the start of the year.

The purchase of First Data gives KKR a company that is at "the forefront of the worldwide trend toward electronic payments," KKR executive Scott Nuttall said in the statement.

KKR was likely attracted by First Data's US$1.1 billion in earnings before interest and taxes, analysts said. Shares of First Data rose 18 percent to US$32.74 in German trading.

First Data is KKR's third proposed buyout valued at more than US$15 billion in the past two months. KKR and TPG Inc, the former Texas Pacific Group, agreed in February to acquire Dallas-based power producer TXU for US$31 billion and assumed debt of US$12 billion. KKR and billionaire Stefano Pessina last week increased their bid for Alliance Boots Plc, the largest UK drugstore chain, to ?10.1 billion (US$19.9 billion).

Private-equity firms typically borrow two-thirds to three-quarters of the purchase price of a target and finance the rest with cash raised from investors, as well as their own funds. They seek to expand businesses or improve performance before selling them within five years to other funds or to investors in initial public offerings.

Buyout-fund managers have benefited as the cost of debt financing fell to the lowest in a decade. They announced a record US$188 billion of takeovers in the first quarter, Bloomberg data showed. Armed with more than US$210 billion of cash raised since the start of last year, LBO firms now have enough equity capital to make US$2 trillion of acquisitions.

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