The US’s FIS has swooped on British rival Worldpay Inc. in a $35 billion deal that will create a payments and financial services technology juggernaut – if competition regulators approve the deal.
Worldpay Inc. itself is the result of a recent acquisition, amid ongoing payments sector consolidation. It was formed after the UK’s Worldpay Group bought the US’s Vantiv for £9.8 billion in January 2018.
The ongoing behind-the-scenes integrations resulting from that buyout is no impediment to the deal, FIS’s President Gary Norcross said on a conference call: “Of course that was a key part of our due diligence, the Vantiv-Wordpay combination.”
“But they’re well down the path of product rollout, well down the path of data centre change… This is an offensive deal that looks to where the growth is. It’s a fast-moving market and you hove to move to the growth.”
The two expect to close the deal – approvals permitting – in the second half. Including debt, the deal values Worldpay at about $43 billion. Worldpay shareholders will receive 0.9287 FIS shares and $11 in cash for each share held, valuing the company at $112.12 per share; a 14 percent premium on Friday’s close.
Worldpay processes over 40 billion transactions annually, supporting more than 300 payment types across more than 120 currencies for merchants, businesses and financial institutions on a global basis. It makes money by collecting fees on the transactions, as well as data insights, and consultancy.
FIS is the world’s largest provider of financial technology solutions, with revenues of $2 billion-plus per quarter. Its systems – from back-office automation to front office trading systems – are in use in major commercial banks, hedge funds and insurance companies around the world.
FIS Worldpay Acquisition: “Scale Matters”
“Scale matters in our rapidly changing industry,” said Gary Norcross, chairman, president and chief executive officer, FIS.
“Upon closing later this year, our two powerhouse organizations will combine forces to offer a customer-driven combination of scale, global presence and the industry’s broadest range of global financial solutions.”
He added: “As a combined organization, 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.”
FIS said the deal accelerates its organic revenue growth outlook to 6 percent to 9 percent through 2021. The company anticipates $500 million of revenue synergies and nearly $4.5 billion of free cash flow in three years.
On closing. FIS shareholders will own approximately 53 percent and Worldpay shareholders 47 percent of the combned company. The combination of stock and cash values Worldpay at an enterprise value of approximately $43 billion, including the assumption of Worldpay debt, which FIS expects to refinance.
It will use the name FIS and be based in be headquartered in Jacksonville, Fla.
FIS and Worldpay have “complementary solutions and services” in financial institution issuer services, network and merchant services including global leadership in eCommerce, as well as loyalty and fraud solutions, FIS said.
It remains to be seen whether regulators will see the move as a step too far and require divestments in order for the deal to go ahead.
“Clients will benefit from the combined omni-channel payment and multi-currency capabilities, robust risk and fraud solutions and advanced data analytics” FIS said.
Charles Drucker, executive chairman and chief executive officer, Worldpay. “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.”
Bhavika Shah, Payments Analyst at GlobalData, a leading data and analytics company told Computer Business Review: “In my opinion, the merger of Fidelity Information Services (FIS) with Worldpay, originally acquired by Vantiv represents full value at $43 billion. Worldpay, as of year-end 2018, held a 21 percent share of the US merchant acquiring market by value of acquired transactions, according to GlobalData’s Merchant Acquiring Analytics, making it the largest player in the US in addition to its international presence across 146 countries.”
“With this acquisition FIS stands to drastically improve its position in the US market by combining the two companies’ complementary services.”
She added: “Following the 2017 acquisition by Worldpay by Vantiv, today’s Worldpay represents all of the business of both those companies – and as a result FIS will hold a commanding position in the US market following the deal. In 2018, Worldpay processed approximately $1.4 trillion on worth of card transactions in the US alone and therefore FIS immediately gains access to this huge revenue stream and access to a large merchant client base.”