FIS to sell Worldpay to GTCR in a deal that will net the fintech proceeds of $11.7 billion

By Ciara Linnane

FIS acquired Worldpay in 2019 for $43 billion

Fidelity National Information Services Inc. said Thursday it has agreed to sell a majority stake in its Worldpay Merchant Solutions business to private-equity funds managed by GTCR in a deal that will net it $11.7 billion.

FIS (FIS), the financial-tech company, or fintech, previously announced plans to spin off its merchant business, which largely consists of Worldpay, which it acquired in 2019 for $43 billion.

Since then, FIS's stock has languished and underperformed rivals Global Payments Inc. (GPN) and Fiserv Inc. (FI) amid stiff competition in the payments space.

In February, the company announced it had taken a $17.6 billion non-cash goodwill impairment charge related to the merchant-solutions business in its fourth quarter. That pushed it to a net loss of $174 billion, from net income of $291 million in the year-earlier period.

On Thursday, it said the deal now agreed will give it $11.7 billion in proceeds and allow it to retain a 45% stake in Worldpay. Worldpay is one of the biggest global merchant acquirers measured by transactions, with $2 trillion in payment volume in 2022.

The price values Worldpay at $17.5 billion, with an additional $1 billion in consideration that's contingent on GTCR meeting certain returns.

GTCR has committed to investing up to $1.25 billion in additional growth capital to accelerate Worldpay's growth strategy.

The deal is expected to close by the first quarter of 2024 and Charles Drucker will remain CEO of Worldpay.

"This attractive upfront valuation equates to a 9.8-times multiple on expected fiscal 2023 adjusted EBITDA, including estimated dis-synergies and previously unallocated corporate and other costs, which represents a material premium to FIS' recent valuation of approximately 8-times, and is aligned with leading, scaled payments players," FIS said in a statement.

FIS will use the proceeds of the deal to bolster its balance sheet by paying down debt, as well as to buy back stock. The company will remain a provider of fintech solutions to banks, capital markets firms, corporations and developers around the world, while also retaining its commercial relationship with Worldpay.

FIS said it now expects to be above the midpoint of its second-quarter guidance for revenue and adjusted EPS. The company said during its first-quarter earnings that it expects second-quarter adjusted EPS of $1.45 to $1.50 on revenue of $3.675 billion to $3.725 billion.

Investors appeared unimpressed by the news, sending FIS's stock down 2.6% Thursday.

Earlier this week, Truist analysts recommended their clients stay sidelined on FIS and instead focus on legacy processors with better fundamentals and greater intrinsic value.

They named Global Payments and Fleetcor Technologies Inc. (FLT) as examples and companies they expect will benefit from potential M&A in the sector.

Other fintechs with compelling risk/rewards -- and that are potential takeover targets -- were listed as Shift4 (FOUR), Euronet Worldwide Inc. (EEFT) and Repay Holdings Corp. (RPAY), they wrote.

FIS' stock fell 2.6% Thursday and is down 14% in the year to date, while the S&P 500 has gained 16%.

-Ciara Linnane

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07-06-23 1058ET

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