ValueAct Builds $1.2 Billion Fiserv Bet, Touts Square Rival

(Bloomberg) -- Activist investor ValueAct Capital Management has built a new position in Fiserv Inc. and believes its Clover credit-card processing business could be worth $185 billion by 2024.

San Francisco-based ValueAct has built a new $1.2 billion position in the financial technology and payments firm, according to an investor presentation seen by Bloomberg. It believes Clover’s business is already bigger than that of rival Square Inc. and growing faster, the presentation shows.

ValueAct said it believed Clover could be valued at $30 billion to $45 billion including debt on a standalone basis, approaching nearly half of Fiserv’s $96 billion enterprise value. 

“At this point in the cycle, we believe there is more money to be made investing behind incumbents transforming themselves than there is betting on disruptors,” ValueAct said in the presentation. “Fiserv checks all our boxes as a digital transformation candidate.”

Fiserv shares rose as much as 5% on the news Thursday. 

A representative for ValueAct declined to comment. A representative for Brookfield, Wisconsin-based Fiserv wasn’t immediately available for comment. 

Shares in Fiserv have gained 13% over the past 12 months, giving it a market value of about $75 billion, as its retail customers reopened their stores following coronavirus lockdowns. 

ValueAct, run by Mason Morfit, said it views Fiserv as cheaper, faster-growing and higher-quality than the median S&P 500 company, even excluding Clover. The activist investor sees room to accelerate Clover’s growth and profitability, as well as add value by simplifying Fiserv’s strategic focus and communication. 

The firm argues that developing or acquiring more Clover-like transformative business lines -- in areas like cloud-native mobile banking and digital card issuance platforms -- could bring significant growth for Fiserv. 

Fiserv acquired payment processor First Data Corp. for $22 billion in 2019, one of the biggest financial mergers of the previous decade when it was announced. Earlier this year, it promoted former First Data’s former leader Frank Bisignano to chief executive officer. 

ValueAct was founded in 2000 and has about $16 billion of assets under management. It has agitated for changes at some of the world’s largest and most prominent companies, including Citigroup Inc., Adobe Systems Inc., Microsoft Corp., and Rolls-Royce Holdings Plc.

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