FIS (NYSE: FIS), a leader in financial services technology, recently announced an acceleration of its previously announced separation plan to create 2 highly focused global companies with greater strategic flexibility. And FIS has signed a definitive agreement to sell a majority stake in its Worldpay Merchant Solutions business to private equity funds managed by GTCR in a transaction valuing Worldpay at $18.5 billion, including $1 billion of consideration contingent on the returns realized by GTCR exceeding certain thresholds.
The deal maximizes shareholder value by immediately securing proceeds based on a $17.5 billion valuation with an opportunity for further upside. And 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. Plus FIS will receive upfront, net proceeds of approximately $11.7 billion while retaining a non-controlling 45% ownership interest in a new standalone joint venture. The deal was unanimously approved by the FIS Board of Directors.
This agreement will enable greater management focus and operational simplification for both FIS and Worldpay. And the upfront cash proceeds will create immediate capital allocation flexibility. FIS is going to use proceeds from the sale to pay down debt and return additional capital to shareholders through its existing share repurchase authorization as well as for general corporate purposes while maintaining a strong investment-grade credit rating. As part of the deal, GTCR has committed an additional equity capital investment in Worldpay of up to $1.25 billion to pursue inorganic growth opportunities.
Worldpay – one of the largest global merchant acquirers by transactions with $2 trillion in payments volume in 2022 – will remain a leader of commerce solutions to merchants of all sizes. And as previously announced, Charles Drucker will become CEO of Worldpay upon the close of the transaction.
FIS is going to remain a leading provider of financial technology solutions for financial institutions, capital markets firms, corporates, and developers globally. The company is going to continue to benefit from its strong brand, extensive domain expertise and portfolio breadth, strong long-term and marquee client relationships, and global distribution and scale.
FIS and Worldpay are going to enter into commercial agreements, preserving a key value proposition for clients of both businesses and minimizing potential dis-synergies. And these agreements will allow Worldpay continued access to FIS products to resell to its clients, as well as access to FIS’ financial institution clients as it continues to scale its bank channel. Plus FIS will retain access to Worldpay’s marquee portfolio of commercial clients to resell its embedded finance offerings.
The deal values Worldpay at $18.5 billion, inclusive of $1 billion in additional consideration that is contingent on the returns realized by GTCR exceeding certain thresholds. And the upfront valuation of $17.5 billion equates to a 9.8-times multiple on expected fiscal 2023 adjusted EBITDA, including estimated dis-synergies and previously unallocated corporate and other costs. Including the $1 billion of contingent consideration, the multiple on the deal would increase to approximately 10.4 times. FIS is going to receive upfront, net proceeds of approximately $11.7 billion at close. On a pro-forma basis for the transaction, FIS expects leverage to be about 2.5 times, based on 2023 Adjusted EBITDA upon close.
The deal is expected to close by Q1 2024, subject to regulatory approvals and other customary closing conditions. And following the closing of this transaction, FIS’ ownership interest in Worldpay will be reported as income from minority interest.
KEY QUOTES:
“This transaction allows FIS to partially monetize our Merchant Solutions business at an attractive valuation and provides certainty for all stakeholders. It also allows us to simplify and drive greater focus on delivering innovative, next-generation financial technology and software solutions. At the same time, Worldpay will become a privately held company and benefit from the resources and expertise of GTCR, which has committed additional capital to allow Worldpay to pursue inorganic growth in the rapidly evolving payments space.”
“I am grateful to our team for their hard work in preparing for a separation, which has positioned us to execute seamlessly on this transaction. I am also proud that FIS will maintain a meaningful minority stake in Worldpay and participate on the Worldpay Board, allowing us to continue our strong commercial partnership and benefit from continued upside in the business. We are excited to partner with GTCR given its successful history of value creation in collaboration with corporate partners.”
— FIS CEO and President Stephanie Ferris
“This new separation path positions Worldpay for immediate success, combining the benefits of a well-established global brand and group of talented payments professionals with the energy of an independent startup, all backed by a world-class private equity firm. I’m excited to be working with my former colleagues and GTCR to win in the marketplace and position Worldpay for long-term success. With the support of GTCR’s resources and expertise, and continuing to partner with FIS, I believe that Worldpay will create and define the future of merchant payment solutions.”
— Charles Drucker, incoming Worldpay CEO
“We are thrilled to be working with Charles and the Worldpay leadership team to build on the company’s culture of innovation, invest in new capabilities and advance its leadership position across channels and geographies. As a firm, we have a long history of investing in the payments sector, and that experience provides us with tremendous confidence in the opportunity for sustained, long-term growth at Worldpay. We look forward to partnering with FIS to deliver value for customers and other stakeholders.”
— Collin Roche, Co-CEO and Managing Director at GTCR
