First Data Can ‘Go-Shop’ a Better Deal

DENVER – Yesterday’s agreement by Kohlberg Kravis Roberts & Co. to acquire First Data Corp. includes a 50-day ‘go-shop’ provision that will allow the giant payments processor to shop for a better deal than the $34-a-share, $29 billion takeover. This kind of ‘go-shop’ clause is being used increasingly to deflect shareholder criticism that companies are agreeing to buyouts without holding auctions to get the highest price. After that period, First Data is subject to a ‘no-shop’ provision, which restricts its ability to solicit, discuss or negotiate competing proposals, according to proxy materials filed yesterday with the Securities and Exchange Commission in connection with the huge deal. Over the last two months, KKR, the buyout firm immortalized in the best-selling book and movie ‘Barbarians at the Gate,’ has embarked on an orgy of deal-making totaling more than $100 billion. Just last month the firm completed a deal that will rank among the largest buyouts ever, a $45 billion acquisition of Texas Utilities. Also pending are KKR deals for Dollar General Corp., Laureate Education Inc., and last week the company and Italian billionaire Stefano Pessina increased their bid for Alliance Boots Plc, the largest U.K. drugstore chain, to 10.1 billion pounds ($20 billion). If the First Data deal is scotched, First Data could be required to pay KKR a $700 million break-up fee, a typical part of corporate acquisitions, but unusually large. KKR, the recognized leader in corporate takeovers, has provided First Data with comprehensive financing arrangements to complete the deal. First Data has been restructured several times since its spin-off from American Express in 1992. Originally a processor of transactions, the company acquired two major electronic funds networks, STAR and NYCE, three years ago (an antitrust settlement with the Justice Department forced it to sell off most of NYCE). Prior to that First Data acquired the venerable Western Union brand and rebuilt it into the world’s largest international money transfer provider, before spinning Western Union off again last November.