Buyout firm GTCR picks up majority stake valuing FIS unit Worldpay at $18.5 bln
SOURCE: REUTERS By Niket Nishant and Anirban Sen July 6 (Reuters) - Private equity firm GTCR LLC on Thursday agreed to buy a 55% stake in Worldpay, the merchant services business of Fidelity National Information Services FIS.N, in a deal that values the unit at $18.5 billion. As part of the...
By Niket Nishant and Anirban Sen
July 6 (Reuters) – Private equity firm GTCR LLC on Thursday agreed to buy a 55% stake in Worldpay, the merchant services business of Fidelity National Information Services FIS.N, in a deal that values the unit at $18.5 billion.
As part of the deal, which is the largest ever for GTCR, FIS will receive upfront proceeds of $11.7 billion and keep a 45% stake in the new entity, according to a statement.
Reuters was first to report on Monday that GTCR was in advanced talks to buy a majority stake in Worldpay.
The transaction would effectively undo FIS’s $43 billion acquisition of Worldpay in 2019, after the unit lost market share to traditional competitors and new financial technology startups.
In December, FIS launched a strategic review under new CEO Stephanie Ferris, after facing pressure from activist hedge funds D.E. Shaw and Jana Partners. In February, FIS said it would consider a spinoff of the merchant services unit, which processes transactions for companies, after taking a $17.6 billion writedown.
The carve-out marks the largest leveraged buyout of 2023, at a time when such deals have become tougher to finance due to expensive and scarcer debt financing, and economic uncertainty.
Private equity-led buyouts in the first half of 2023 totaled $202.47 billion globally, down 58% from the year-ago period, Dealogic data shows.
FIS plans to use the proceeds from the deal to pay down debt and buy back shares from existing shareholders. The deal is expected to close by the first quarter of 2024.
GTCR has also committed an additional investment of up to $1.25 billion in Worldpay to allow the venture to pursue acquisitions. Worldpay will be led by Charles Drucker, its former CEO.
GTCR’s offer prevailed over that of Advent International, another buyout firm that was vying for the business, sources previously told Reuters. GTCR plans to finance half of the deal through equity financing and half through borrowing, the sources said.
Analysts have said underinvestment and operational missteps led to the unsuccessful integration of Worldpay with FIS, which will be left with net debt of $10 billion after the deal closes. As of the end of March, the company had total debt of $20 billion.
The deal values Worldpay at 9.8 times expected fiscal 2023 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
Jefferies analysts said the deal amount was $1.8 billion lower than what they had expected. FIS shares were down 2.1% at $58.56 near midday on Thursday.
The stake sale on Thursday would leave FIS with a core processing systems business, enabling transactions among banks and other financial institutions, as well as its capital markets unit that serves investment firms.
FIS, which started in 1968 and serves big financial services corporations, has cut thousands of jobs since the review began. It plans to cut costs by $1.25 billion in its broader revamp.
The merchants business accounts for about 30% of the company’s revenue, while FIS’s banking technology arm constitutes about 46%, and capital markets the remainder.
Goldman Sachs, J.P. Morgan Securities and Centerview Partners advised FIS on the deal.
GTCR lined up debt financing from a slew of banks including JPMorgan JPM.N, Goldman Sachs GS.N, Citigroup C.N, Wells Fargo, Deutsche Bank Securities and UBS Securities. Citi, Wells Fargo Securities, LLC, Deutsche Bank Securities Inc and UBS Securities LLC also served as financial advisers to GTCR.
(Reporting by Niket Nishant in Bengaluru and Anirban Sen in New YorkAdditional reporting by Manya Saini in BengaluruEditing by Arun Koyyur and Matthew Lewis)