Fidelity National (FIS) to Sell 55% Stake in Worldpay to GTCR
Fidelity National Information Services, Inc. FIS agreed to divest a majority stake in its Worldpay Merchant Solutions business, its merchant payments arm, to the private equity firm, GTCR. The deal puts the business’ value at $18.5 billion. The company also provided a preview of its second-quarter results.
Per the deal, Fidelity National will divest 55% of the business to GTCR and retain the remaining 45%. The company will receive net proceeds of $11.7 billion from the transaction. FIS acquired Worldpay through a deal valued at around $43 billion, including debt, in 2019. However, the business took a hit, losing market share to Fintech startups and traditional competitors.
The deal marks one of the largest corporate carve-outs and is expected to close by the March quarter of 2024. After completion, Fidelity National’s ownership interest in the business will likely be reported in income from minority interest. The move is expected to simplify operations for the company. It will likely utilize the proceeds from the deal to reduce the debt burden and buy back shares. It had long-term debt, excluding the current portion, of $13,905 million at the first-quarter end.
GTCR, which has arranged debt financing from multiple banks for the transaction, is expected to make additional investments of up to $1.25 billion in Worldpay to unlock inorganic growth opportunities. The business is expected to gain from the acquirer’s resources and expertise and enjoy the freedom of being a privately held firm. Charles Drucker, Worldpay’s former CEO will lead the business following the close of the deal.
The partial monetization of the Merchant Solutions business is expected to create greater value for FIS, which plans to maintain a solid commercial relationship following the move. Last year, Worldpay witnessed payments volume of $2 trillion.
2Q23 Expectations
Fidelity National also announced that it expects its second-quarter revenues, adjusted EBITDA and adjusted EPS to be above the mid-point of the guided ranges. Previously, the company projected second-quarter revenues to remain between $3,675 million and $3,725 million, while adjusted EPS was estimated to be in the $1.45-$1.50 band.
Price Performance
Shares of Fidelity National have gained 8% in the past three months compared with the 6.4% rise of the industry.
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Zacks Rank & Key Picks
Fidelity National currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Business Services space are Paysafe Limited PSFE, Visa Inc. V and WEX Inc. WEX. While Paysafe currently sports a Zacks Rank #1 (Strong Buy), Visa and WEX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
London-based Paysafe is a digital commerce solutions provider for different businesses. The Zacks Consensus Estimate for PSFE’s 2023 earnings has improved more than 240% in the past 60 days.
Headquartered in San Francisco, Visa is a global payments technology giant. The Zacks Consensus Estimate for Visa’s current-year earnings indicates a 14.5% year-over-year increase.
Based in Portland, ME, WEX is a commerce platform operator with operations in the United States and globally. The Zacks Consensus Estimate for WEX’s 2023 earnings suggests 3.8% year-over-year growth.
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