FIS (NYSE:FIS), a global leader in financial services technology, today announced an acceleration of its previously announced separation plan to create two highly focused global companies with greater strategic flexibility.
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 transaction maximizes shareholder value by immediately securing proceeds based on a $17.5 billion valuation, with opportunity for further upside. 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.
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 transaction was unanimously approved by FIS’ Board of Directors.
The agreement will enable greater management focus and operational simplification for both FIS and Worldpay. In addition, the upfront cash proceeds will create immediate capital allocation flexibility. FIS will 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 agreement, GTCR has committed an additional equity capital investment in Worldpay of up to $1.25 billion to pursue inorganic growth opportunities.
“This transaction allows FIS to partially monetize our Merchant Solutions business at an attractive valuation and provides certainty for all stakeholders,” said FIS CEO and President Stephanie Ferris. “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.”
“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,” said Charles Drucker, incoming Worldpay CEO. “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.”
Collin Roche, Co-CEO and Managing Director at GTCR, said, “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.”
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. As previously announced, Charles Drucker will become CEO of Worldpay upon close of the transaction.
FIS and Worldpay will enter into commercial agreements, preserving a key value proposition for clients of both businesses and minimizing potential dis-synergies. 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. Similarly, FIS will retain access to Worldpay’s marquee portfolio of commercial clients to resell its embedded finance offerings.
The transaction 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. 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 transaction would increase to approximately 10.4-times. FIS will receive upfront, net proceeds of approximately $11.7 billion at close. On a pro-forma basis for the transaction, FIS expects leverage to be approximately 2.5-times, based on 2023 Adjusted EBITDA upon close.
The transaction is expected to close by Q1 2024, subject to regulatory approvals and other customary closing conditions. Following the closing of this transaction, FIS’ ownership interest in Worldpay will be reported as income from minority interest.
