Fidelity National Information Services Inc. (FIS) and Worldpay Inc. pared earlier gains in Monday trading, as analysts question FIS’s pact to acquire Worldpay Inc. for about $34 billion in cash and stock, worth about $112.12 per share as of Friday’s close.
Analysts wondered why Worldpay agreed to be bought at that price, instead of trying to get more out of its 2017 merger with Vantiv Inc., and doubted FIS’s move was much more than a response to Fiserv Inc. and First Data Corp. combining.
Worldpay rose about 10 percent and FIS fell around 0.1 percent after executives touted accelerated revenue growth and cost savings.
SunTrust, Andrew Jeffrey
The deal seems like a direct reaction to the Fiserv and First Data deal, Jeffrey wrote in a note. “We do not initially like this combination,” as the “strategic merits elude us.” That’s partly because FIS is adding “U.S. big box retail exposure and long-term ISV channel risk,” even as it buys “a faster growing company in a secular growth industry, which is a positive.”
Jeffrey adds that Worldpay shares have been trading “strongly,” begging the question of why management would sell at just a 13 percent premium, “particularly considering apparent momentum in its technology segment.”
He sees Global Payments as potentially the biggest beneficiary of the proposed combination, as it would have “two large global rivals which will likely be distracted and pursuing relatively larger customers.” He doesn’t see an impact on Fiserv/First Data, “as we simply do not see Fidelity bringing a lot of incremental competitive value to the table.”
KBW, Steven Kwok
KBW was surprised Worldpay was “choosing to sell now ahead of realizing the full cost (about half left) and revenue synergies ($100 million run-rate exiting 2020) from the Vantiv/Worldpay combination.”
“We would have expected other players in the space like Total System Services Inc. to have been more strategically compelling for FIS given their card issuer processing business.” The deal may be positive for Global Payments, Total System Services, and Adyen NV, as others are “potentially distracted with their fairly complex mergers.”
MoffettNathanson, Lisa Ellis
“The deal reinforces the transformational and disruptive impact that e-commerce is having on payments,” Ellis said via email. “In-store payments are very local and difficult to scale, whereas e-commerce has significant benefits to scale, and is very global.”
She noted the transaction would create “ a strong competitor to Fiserv plus First Data — presumably that deal triggered this one.” She sees potential speculation about Global Payments and Total System Services merging. Chase Paymentech, the only major global acquirer that’s a bank captive, may to look at Total System Services too.
Adds that there’s “interesting read-through to Visa and Mastercard.” The move probably wouldn’t affect them much, “but any deals that create larger, stronger players is on the margin not good for them.”
Morgan Stanley, James Faucette
Faucette sees Worldpay shares trading in line with FIS’s until the deal closes, probably in the second half of this year. That may mean upside for Worldpay holders if FIS shares rally in the meantime, he said, noting that First Data was trading about 13 percent above where the Fiserv deal was originally announced.
©2019 Bloomberg L.P.
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