First Data Drops After KKR Reduces Stake in Secondary Offering

(Bloomberg) -- First Data Corp. fell the most in 10 months after announcing that an investment firm owned by KKR & Co. would sell shares in a secondary offering.

First Data slid 4.9 percent to $17.93 at 9:32 a.m. in New York, the most intraday since Nov. 4 and the worst performance in the Russell 1000 Financial Services Index. The stock had climbed 33 percent this year through Monday, outpacing the 7.8 percent advance of the 252-company index.

New Omaha Holdings, KKR’s investment vehicle for First Data, will sell 85 million shares, the payments processor said late Monday in a statement. KKR will remain the primary owner of the remaining Class B stock, which will comprise about 50 percent of shares outstanding after the offering, Sanford C. Bernstein & Co. analyst Lisa D. Ellis said Tuesday in a note to clients.

“Uncertainty about KKR’s exit strategy for its now decade-long First Data investment has been a persistent overhang,” said Ellis, who rates the stock as market perform. “This overhang has been a primary reason the stock has been ‘stuck’ in the $18 range over the past three months, despite an improving business outlook.”

KKR took New York-based First Data private in a leveraged buyout in 2007. The business grappled with debt and cycled through a succession of chief executives until Frank Bisignano joined from JPMorgan Chase & Co. in 2013. He took First Data public two years later.

Bank of America Corp., Citigroup Inc. and KKR will be joint bookrunning managers for the offering, according to the statement. Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc, Keefe, Bruyette & Woods, KeyCorp, Mizuho Financial Group Inc., Morgan Stanley, PNC Financial Services Group Inc., SunTrust Banks Inc. and Wells Fargo & Co. will be bookrunners.

The sale is scheduled for Thursday, people familiar with the timing have said. The underwriters will have a 30-day option to buy as many as 12.8 million additional shares, First Data said.