FIS to Sell Majority Stake in Worldpay to Buyout Group for Up to $18.5 Billion
July 06, 2023: In a significant move, US financial technology group Fidelity National Information Services (FIS) has agreed to sell a majority stake in its merchant payments arm, Worldpay, to a private equity firm called GTCR. This deal, valued at up to $18.5 billion, is one of the largest corporate carve-outs ever seen.
The agreement effectively reverses FIS’s previous acquisition of Worldpay in 2019, valued at over $30 billion. FIS had announced its intention to separate from the unit and distribute it to stockholders earlier this year, and now it has found a buyer in GTCR.
GTCR emerged victorious after an auction conducted by FIS’s bankers, Centerview Partners, involving several major buyout firms. As part of the deal, FIS will receive $11.7 billion in cash and retain a 45% stake in Worldpay. The cash proceeds will be used by FIS to pay off debt and fund share buybacks.
According to FIS’s CEO, Stephanie Ferris, this transaction allows the company to partially monetize its merchant solutions business at an attractive valuation and provides certainty for all stakeholders. GTCR has valued Worldpay at 9.8 times its projected fiscal 2023 adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA). The upfront valuation is $17.5 billion, but the purchase price could reach $18.5 billion based on future returns.
For GTCR, this acquisition marks its most significant in history. The Chicago-based private equity firm has a history of investing in the payments sector and had previously sold a business to Worldpay for over $1 billion in 2010.
Worldpay itself has had a fascinating ownership history. It was acquired by Advent International and Bain Capital in 2010 from the Royal Bank of Scotland for $3 billion. The company was later listed on the London Stock Exchange in 2015, resulting in significant financial gains. Two years later, it merged with Vantiv, which Advent had separated from Fifth Third Bank, creating a combined entity valued at over £22.2 billion.
FIS’s acquisition of Worldpay in 2019 aimed to expand its presence in the payments industry amid a wave of consolidation. However, integrating the two businesses proved challenging, and FIS faced pressure from activist investors to review its strategy.
GTCR plans to finance approximately half of the purchase through debt and the other half through equity. Major banks, including JPMorgan, Goldman Sachs, Citigroup, Wells Fargo, UBS, and Deutsche Bank, have assembled a debt financing package, signaling a return to financing sizeable private equity buyouts. This is notable considering banks’ previous struggles when offloading debt from takeovers.
The deal is expected to close in the first quarter 2024, pending regulatory approvals. Upon completion, Charles Drucker will assume the role of CEO of Worldpay.
In summary, FIS’s decision to sell a majority stake in Worldpay to GTCR for up to $18.5 billion marks a significant shift in strategy. The deal allows FIS to monetize its merchant solutions business and reduce debt while retaining a significant stake in Worldpay. GTCR, with its expertise in the payments sector, is confident in the long-term growth potential of Worldpay.