Under the agreement, First Data shareholders would be paid $34 for each share of the company they own, a 26 percent premium to where the shares closed on March 30. Based on the 775.1 million shares outstanding the company had in February, the deal has an equity value of $26.4 billion.
Neither company was available for immediate comment.
The deal includes a "go-shop" provision that allows First Data to solicit proposals from other suitors for the next 50 days. The company said it plans to actively do so with the strategic review committee and its advisers.
Paying Big Premium
At $34 per share, KKR is paying 27 times estimated 2007 earnings of $1.24 per share. Based on the $26.4 billion equity value, KKR is paying nearly 14 times estimated 2007 earnings before interest, taxes, depreciation and amortization of $1.9 billion, according to Reuters Estimates.
First Data said it was a great time to maximize the company's value and deliver cash to shareholders.
The agreement was unanimously approved by the First Data board of directors based upon the recommendation of the strategic review committee made up of three independent directors.
The deal is expected to close by the end of the third quarter, subject to shareholder and regulatory approvals.
First Data intends to tender for all of its outstanding bonds in conjunction with closing.
The move comes about six months after First Data spun off Western Union , the payment processing company that built the first transcontinental telegraph line.
Merger Activity Soars
U.S. merger activity surged 21% in value in the first quarter, according to figures from research firm Dealogic last week, as private equity firms and corporate buyers shrugged off stock market volatility and poured money into sectors such as energy, real estate and financial institutions such as First Data.
Merger activity has soared because of the overall health of the U.S. economy and the availability of money at favorable rates, bankers have said.
With private equity firms competing hard for large buyout targets, the First Data deal makes KKR the firm behind the top three largest leveraged buyouts.
KKR and Texas Pacific Group reached a deal in February to buy Texas Utility TXU for nearly $32 billion in cash. KKR bought RJR Nabisco for $25.1 billion in 1988.
Citigroup, Credit Suisse, Deutsche Bank, HSBC, Lehman Brothers, Goldman Sachs and Merrill Lynch have committed to provide debt financing for the deal and are advising KKR.
Morgan Stanley is advising First Data and Evercore Group the board's strategic review committee.