(Bloomberg) -- It’s a race to the top in the international payments industry.
Fidelity National Information Services Inc.’s $35.5 billion deal to acquire Worldpay Inc., the biggest deal ever in the international payments sector, follows by just two months the previous record-holder -- Fiserv Inc.’s agreement in January to pay $22 billion for First Data Corp.
Dealmaking is accelerating as payments companies snap up rivals to grab market share, with investors wondering which firms might be next. Global Payments Inc. and Total System Services Inc. were among stocks that gained in early trading Monday, but dropped by midday.
Both FIS and Worldpay provide the technological infrastructure that lets consumers securely pay an overseas vendor on an e-commerce site or tap their cards to buy a cup of coffee. Industrywide revenue is projected to surge to $2.4 trillion by 2027, according to a report from Boston Consulting Group and Swift.
FIS’s Worldpay purchase “reinforces the transformational and disruptive impact that e-commerce is having on payments,” Lisa Ellis, an analyst at MoffettNathanson, 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.”
FIS, which focuses on the software behind payments for retail and banking, will assume Worldpay’s debt, bringing the enterprise value of the deal to about $43 billion, the companies said Monday.
“The transaction essentially expands FIS’s capabilities by enhancing its acquiring and payments offerings while increasing WP’s distribution footprint, and accelerating its entry into new geographies,” Moshe Katri, an analyst at Wedbush, said in a note to clients.
Worldpay shareholders will receive $11 a share in cash and 0.9287 of a FIS share, which was worth a combined $112.12 as of last week’s close. That was 14 percent more than Friday’s closing price for Symmes Township, Ohio-based Worldpay. Including Class B shares and warrants and options, the deal has an implied equity value of $35.5 billion.
Worldpay shares jumped 9.8 percent to $108.38 at 1:39 p.m. in New York, after trading as high as $112. Fidelity National, which is based in Jacksonville, Florida, declined 0.7 percent to $108.08.
Worldpay pared earlier gains of as much as 14 percent as some analysts questioned why the company agreed to be bought before trying to squeeze more value from its 2017 merger with Vantiv Inc.
“We do not initially like this combination,” and the “strategic merits elude us,” said Andrew Jeffrey, an analyst at SunTrust Robinson Humphrey Inc. “We simply do not see Fidelity bringing a lot of incremental competitive value to the table.”
The largest payments firms, such as Worldpay, Chase Paymentech and First Data, each handle about $1 trillion annually. Fast-growing Dutch rival Adyen NV is expanding by offering to handle transfers in more currencies and payment types than its competitors.
Monday’s deal, when completed, will make the combined company the biggest in the processing and payments industry, according to data compiled by Bloomberg.
Gary Norcross, chief executive officer at FIS, said on a conference call Monday that the transaction will help the company build the broadest suite of financial services in the industry, and responds to “the massive change that’s occurring throughout the industry driven by modernization and innovation.”
Initial public offerings have been climbing along with mergers. Italy’s Nexi SpA said Monday that it plans an IPO in Milan by the end of April, aiming to raise as much as 2.7 billion euros ($3.1 billion), according to people familiar with the plan. Adyen was one of the best-performing IPOs globally in 2018. Network International, a Middle Eastern payments processor, on March 14 announced its plan for a London IPO in the next four weeks.
--With assistance from Giles Turner and Keith Campbell.
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