Boosting its merchant acquiring services,
Total System Services Inc.
) announced its intention to acquire Utah-based payment solution
provider - ProPay - for an undisclosed amount. Subject to
regulatory approvals, the deal is expected to culminate by the
end of this year.
With over 15 years of experience in the financial services
industry, ProPay offers user-friendly, well-protected and
reasonably priced payment solutions to different categories of
organizations. These range from home-based entrepreneurs to high
net worth corporations. Moreover, the company offers customized
processes such as ProPay JAK, which delivers secure mobile
ProPay processes over 250,000 small merchants to tap the
market of direct selling entities. This feature, in turn, is
expected to help Total System expand its merchant acquiring
services within small and micro-merchants' market. Direct
penetration into these large base level markets, primarily
through the rapidly growing mobile banking services, is not only
going to enhance Total System's market position but also help it
achieve its long-term target of being among the top 10 acquirers
in the world.
Growth Through Acquisitions
Total System continues to enhance its processing solutions by
developing solutions and strategic acquisitions to expand its
service offerings. In April 2010, the company acquired 51%
ownership of a newly formed company named First National Merchant
Solutions LLC (FNMS) for approximately $150.5 million. FNMS was
formed under the company's joint venture with First National Bank
of Omaha (FNBO) of Omaha, Nebraska.
Further in January 2011, Total System acquired the remaining
49% of FMNS for $169.6 million. Following the completion of the
acquisition, FNMS was renamed as TSYS Merchant Solutions (TMS).
Additionally, in May 2011, the company acquired TermNet Merchant
Services, which is the 52nd largest merchant acquirer in the U.S.
by dollar volume, according to The Nilson Report.
Further, in October 2011, Total System announced the merchant
portfolio acquisition of Florida-based Vanguard Payment Systems
Inc. Total acquisitions in the merchant acquiring space added
2.9% to the top-line growth in 2011, and are expected to augment
its contribution to the financials in 2012 and beyond.
Total System's risk-free balance sheet, modest cash position
and cash flow generating capability provide viable scope for
efficient capital deployment, primarily through share buybacks
and acquisitions. Going ahead, we believe new acquisitions and
joint venture deals would help perk up the company's growth and
maintain its competitive position against arch-rivals such as
Heartland Payment Systems Inc.
Wright Express Corp.
). Also, its pipeline of international opportunities should help
stimulate above-average growth.
Currently, we maintain a long-term Neutral stance on Total
System with a Zacks Rank #3, which implies a short-term Hold
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