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On Wednesday, BMO Capital Markets maintained its Market Perform rating on Global Payments Inc. (NYSE:GPN) with a steady price target of $86.00. The decision comes as Global Payments, currently trading at an attractive P/E ratio of 12.2x, announces the divestiture of its Payroll business for approximately $0.9 billion after taxes, a transaction that equates to roughly 5% of the company’s $18.4 billion market capitalization. According to InvestingPro data, the company has demonstrated strong financial health with a "Good" overall rating.
BMO Capital views this sale as a move that neither enhances nor diminishes Global Payments’ organic growth trajectory. With annual revenue of $10.1 billion and EBITDA of $4.4 billion, the company maintains substantial operational scale. The sale is seen as a step that increases the company’s financial leeway in anticipation of the upcoming acquisition of payment processing firm Worldpay.
Analysts from BMO Capital estimate that Acrisure, the acquiring party for the Payroll business, is paying close to 12 times the EBITDA, which they note is a substantial premium compared to Global Payments’ overall valuation multiple. Despite the influx of capital from the sale, BMO Capital remains prudent regarding Global Payments’ future, citing a "significant execution risk" associated with the company’s efforts to speed up its organic growth.
The sale of the Payroll business is part of Global Payments’ strategic maneuvers as it prepares to integrate Worldpay into its operations. The acquisition of Worldpay is poised to be a transformative move for Global Payments, potentially reshaping its position within the payments industry.
Global Payments’ stock price will continue to be watched closely by investors as the company navigates through these significant changes and aims to execute its growth strategy effectively in the wake of the divestiture and the pending Worldpay acquisition. Despite a significant 36% decline over the past six months, InvestingPro analysis suggests the stock is currently undervalued. For deeper insights and access to comprehensive financial analysis, investors can explore the detailed Pro Research Report available on InvestingPro, covering this and 1,400+ other top US stocks.
In other recent news, Global Payments Inc. announced it will sell its payroll business to Acrisure for $1.1 billion as part of its strategy to streamline operations and focus on core commerce solutions. The transaction, expected to close in the second half of 2025, will allow Global Payments to return capital to shareholders and maintain financial stability. Additionally, the company has entered into a mutual referral agreement with Acrisure, enabling it to continue offering integrated payroll services to its clients.
In another development, Global Payments has secured a $7.25 billion unsecured revolving credit facility with Bank of America and other lenders, enhancing its financial flexibility. This facility includes an immediate $5.75 billion and an additional $1.5 billion contingent on the completion of its Worldpay acquisition. Meanwhile, Bernstein analysts have lowered their price target for Global Payments to $95, maintaining a Market Perform rating, while BMO Capital Markets has reduced its target to $86, citing concerns over execution risks related to the Worldpay acquisition.
Both analyst firms have expressed caution, noting that while the company has set ambitious medium-term growth targets, the complexity of recent transactions could pose challenges. These developments reflect Global Payments’ ongoing efforts to transform its business and position itself as a leading commerce solutions provider.
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