Under the agreement, which has been unanimously approved by both boards of directors, First Data shareholders will receive a fixed exchange ratio of 0.303 Fiserv shares for each share of First Data common stock they own.

This represents $22.74 based on closing prices as of January 15, and a premium of 29% to the five-day volume weighted average price as of that date. Fiserv shareholders will own 57.5% of the combined company and First Data shareholders 42.5%.

News of the plan sent First Data shares soaring more than 20% in pre-market trading, while Fiserv saw a six per cent dip.

Two of the biggest and most established players in the fintech arena, the two firms say that their combination will enable them to offer a range of payments and financial services, including account processing and digital banking solutions; card issuer processing and network services; e-commerce; integrated payments; and the Clover cloud-based point-of-sale system.

The merger should also result in big financial benefits, with the transaction expected to generate at least $500 million of revenue synergies over a five year period. Meanwhile, about $900 million in run-rate cost synergy savings over five years are also predicted. Combined earnings per share are expected to rise by more than 20% in the first year.

Fiserv chief Jeffery Yabuki will serve as CEO and chairman of the combined firm, with First Data boss Frank Bisignano becoming president and COO. Fiserv will have six board members and First Data four.

Says Yabuki: "We admire First Data for its excellence in merchant acquiring and global issuing services, and the tremendous progress they have made under Frank’s leadership. We expect this combination to catalyze and support an enhanced value proposition for our collective clients and their customers."

The transaction is slated to close in the second half of the year, subject to shareholder and regulatory approval.