Baird Reviews Mastercard's $920 Million Purchase Vocalink Stake

Baird's David Koning commented on the Mastercard's purchases' impact on the company.

Expanding To Electronic Payments

The Baird analyst favored the merger as a way to expand Mastercard's exposure to electronic payments. "We like that the acquisition is ~2.5 percent accretive to total company revenue and provides MA with additional means to touch electronic payments," stated Koning. The analyst viewed the transaction to be about $0.05 dilutive to annual earnings per share (about 1–2 percent).

In addition, Koning believed Vocalink's growth rate would not be dilutive to total company growth in the future.

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The analyst however noted the merger would significantly decrease the likelihood of any potential of future buyback.

About The Deal And Vocalink

According to Koning, these are the most notable facts about the deal:

• Vocalink's 2015 revenue was $240 million,which is about 2.5 percent of Mastercard's total revenue.
• The analyst believes the deal would be expected to close within three to 12 months.
• Vocalink's 2015 EBITDA was $102 million representing about 43 percent margin.
• "Beyond the next two years, management expects Vocalink to grow at a similar rate as the total company, as Vocalink's capabilities are expanded."

The analyst maintains Mastercard's Outperform rating and $115.00 price target.

At the time of writing, Mastercard traded at $92.99, up 0.57 percent Friday.

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