Worldpay and FIS agree $35bn deal

May 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

May 2019 Issue

US FinTech company Fidelity National Information Services Inc (FIS) has agreed to acquire payment processor Worldpay for $35bn in a deal which, when completed, will create the biggest company in the processing and payments industry.

The deal will see shareholders of UK-based Worldpay receive 0.9287 FIS shares and $11 in cash for each share of Worldpay held, a premium of about 14 percent based on the last day of trading before the deal was announced. Upon closing of the transaction, FIS shareholders will own approximately 53 percent of the new company and Worldpay shareholders will own approximately 47 percent. The deal is expected to close in the second half of 2019, pending customary closing conditions and regulatory and shareholder approval.

The total enterprise value of the transaction will be $43bn as FIS will assume Worldpay’s outstanding debt which, FIS has announced, will be refinanced.

Combined, FIS and Worldpay will have annual revenue of about $12bn and adjusted core earnings of around $5bn. The deal is expected to generate an organic revenue growth outlook of 6 to 9 percent through 2021, and $700m of total core earnings savings over the next three years. Furthermore, the companies expect to generate $500m of revenue savings and aim to deliver nearly $4.5bn of free cash flow in three years.

Upon closing, the combined company’s board of directors will consist of 12 members, seven of whom will come from FIS’ board and five from Worldpay’s. Gary Norcross will remain as FIS chairman, president and chief executive. Charles Drucker, Worldpay’s current executive chairman and chief executive, will serve as the executive vice-chairman of the board. The combined company will retain the FIS name and be headquartered in Jacksonville, Florida.

The merger is the biggest deal announced in the electronic payments industry to date. It comes as ever more consumers utilise digital payments rather than cash. Worldpay, the companies noted in a press release, processes over 40 billion transactions annually, supporting more than 300 payment types across more than 120 currencies. FIS’ largest competitor, Fiserv, recently acquired First Data, a payments rival to Worldpay, for around $22bn. In 2018, PayPal Holdings acquired iZettle for $2.2bn and private equity firms bought European firms Nets and Paysafe Group. According to the Boston Consulting Group, the payments industry is expected to be worth $2.4 trillion by 2027.

“Scale matters in our rapidly changing industry,” stated Mr Norcross. “Upon closing later this year, our two powerhouse organisations will combine forces to offer a customer-driven combination of scale, global presence and the industry’s broadest range of global financial solutions. As a combined organisation, we will bring the most modern solutions targeted at the highest growth markets. The long-term value we will create for clients and for shareholders will set the bar in our industry and will create a range of new career opportunities for our employees. I have never been more excited about the future of FIS.”

“At Worldpay, our focus has always been on delivering more value to our clients and partners and making decisions that achieve our growth and performance objectives,” said Mr Drucker. “Combining with FIS helps us accelerate the achievement of that, now benefitting from new scale and capabilities that will truly differentiate the company globally. We are proud to become part of one of the financial services industry’s most respected and consistently performing companies, and I am excited about the new opportunities this brings both for the business and our colleagues worldwide.”

WorldPay was sold by Royal Bank of Scotland in 2010 as a condition of the bank’s bailout following the financial crisis. The company was sold to private equity firms Advent International and Bain Capital for £2bn, with RBS retaining a 20 percent stake – which was sold in 2013 – before the company floated on the London Stock Exchange in 2015.

Richard Summerfield