Investing.com -- TD Cowen downgraded Global Payments (NYSE:GPN) Inc. to Hold from Buy and slashed its price target to $78 from $110, warning that the company’s planned acquisition of Worldpay undermines efforts to streamline operations and introduces fresh execution risks.
The firm said it supported the divestment of Global Payments’ Issuer Solutions unit, but viewed the Worldpay acquisition as a step in the wrong direction, adding complexity and leverage at a time when investors were looking for simplification and improved financial transparency.
We favor the Issuer Solutions divestment, but see Worldpay adding complexity, leverage&increased execution risk that runs counter to needed simplification, TD Cowen analysts wrote.
Shares may be ‘cheap,’ but that proposition wasn’t being heard before&we struggle for NT positive catalysts, added analysts.
The analysts expressed concerns about the integration challenges of combining Worldpay with Global Payments' existing Merchant Solutions unit, noting that previous payments portfolios have yet to be fully integrated.
The added operational burden, they said, could increase fatigue internally and raise merchant attrition risk externally.
TD Cowen also flagged concerns about rising net leverage, which is expected to climb to 3.5x post-deal before gradually returning to 3x over 18–24 months.
That reverses recent progress made after the EVO acquisition. Meanwhile, limited free cash flow generation at Worldpay and delayed revenue synergies mean the short-term upside is muted.
“This deal breeds greater back office/system fragmentation” and hampers NT repo potential, the note said, adding that competitors may exploit the disruption.
TD Cowen values Global Payments at roughly 14.5x pro forma enterprise value to free cash flow and around 7x EV/EBITDA.