Fidelity National Information Services, better known as FIS, said Thursday it will sell a 55% majority stake in its Worldpay merchant payments processing business to the private equity firm GTCR for $11.7 billion.
The transaction values Worldpay at $17.5 billion and allows FIS to retain a 45% stake in a new standalone joint venture with GTCR, the companies said in a joint press release Thursday. Under the agreement, GTCR will pay another $1 billion to FIS if Worldpay achieves certain returns, valuing the business at a higher $18.5 billion, the release said.
As part of the pact between the companies, Chicago-based GTCR will also provide $1.25 billion to the newly separate Worldpay business to allow it to pursue “inorganic growth opportunities,” according to the release. That most likely means GTCR would provide funding for acquisitions. The board of Jacksonville, Florida-based FIS has already unanimously approved the deal.
The transaction “allows us to simplify and drive greater focus on delivering innovative, next-generation financial technology and software solutions,” FIS CEO Stephanie Ferris said in the release.
The transaction lets FIS unwind what amounted to a failed acquisition of Worldpay just a few years ago. In 2019, FIS bought the business for $43 billion, including debt, but ended up writing down the value of the business.
FIS had planned to spin off the Worldpay business by next year, but in recent days news reports surfaced that said the unit was likely to be sold to GTCR, which bested at least one other potential suitor, Advent International, as part of the sale process.
The agreement also allows FIS to continue its commercial relationship with Worldpay, with the companies cross-selling to each others’ customers, the release said. The Worldpay business will be led by “incoming” CEO Charles Drucker, who was previously designated by FIS to lead the business after a spin-off.
FIS’s two remaining businesses, which provide financial technology software services to banks and capital market clients, will use proceeds from the transaction to pay down debt and to fund the company’s ongoing share buyback program as well as for general corporate purposes, FIS said.
“The sale vs. spin option locks in near-term value, enables Worldpay to invest in M&A, specifically around (small and mid-sized businesses), without the scrutiny of the public markets, allows FIS to participate in the potential long-term valuation creation by retaining 45% ownership, and de-levers the balance sheet to maintain FIS’s investment grade rating,” RBC Capital Markets analyst Daniel Perlin said in commenting on the transaction in a Thursday note to clients.
The release today called Worldpay “one of the largest global merchant acquirers,” basing that on the unit processing $2 trillion in payments last year.
The transaction is expected to be completed by the first quarter of next year, according to an online presentation provided by FIS. The company’s executives also held a webcast for investors and analysts today, but didn’t take any questions, citing proximity to the release of second-quarter results.
In the release Thursday, the company reaffirmed its expected results for the quarter, including revenue of about $3.7 billion.