FIS Buys Worldpay for $35 Billion Piling Pressure on Rivals
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FIS Buys Worldpay for $35 Billion Piling Pressure on Rivals
Acquiring Worldpay will help U.S. fintech Fidelity National Information Services Inc. (FIS) expand its reach in digital payments. Worldpay processes around 40 billion transactions a year. For Worldpay, the deal will help expand into new markets and compete with global payment rivals.
The companies are trying to create a “one-stop shop,” said Darrin Peller, analyst at Wolfe Research. They believe joining forces will put them in stronger positions to capitalize on the growing e-commerce payments industry and provide improved financial technology solutions to banks and merchants. Global payments are set to reach close $3 trillion within the next five years, projects McKinsey.
The cash and stock deal values UK-based Worldpay at $43 billion, including the assumption of debt which FIS said it plans to refinance. Under the terms of the deal, Worldpay shareholders get 0.9287 shares and $11.00 in cash for each share of Worldpay.
FIS shareholders will own about 53% of the combined company while Worldpay shareholders will have a roughly 47% stake. Once the deal is closed, the combined company will offer a bevy of services for businesses and financial institutions including enterprise banking, payments, capital markets, and eCommerce services.
Worldpay processes more than 40 billion transactions each year and supports more than 300 payment types in more than 120 currencies.
Acquisitions are Putting the Pressure on Rivals
Analysts and industry experts said they expected the trend to continue, with the latest acquisition putting further pressure on rivals to avoid being left behind or displaced by new entrants.
FIS CEO Gary Norcross said:
“Scale matters in our rapidly changing industry. As a combined organization, we will bring the most modern solutions targeted at the highest growth markets.”
From FIS they explained that the deal will accelerate revenue with organic revenue growth projected to be between 6% and 9% through 2021. The company also expects to realize $700 million of total EBITDA synergies and pro forma 2018 revenue and adjusted EBITDA of around $12. 3 billion and $4.9 billion respectively.
The combined company will maintain the FIS name and will be headquartered in Jacksonville, Florida. FIS gets seven seats on the 12 member board while Worldpay gets five. Norcross will continue to be chairman, president, and CEO while Worldpay CEO Charles Drucker will become the executive vice chairman of the board.
Todd Latham from an international payments platform CurrencyCloud said:
“Until recently, most merchants entrusted banks with processing payments and moving money on their behalf. But it was never really banks’ core business, so little investment was made into making such activities more frictionless and consumer-friendly. Traditionally, it’s been a poor cousin in the bank relative to investment banking.”
Starting in 2006, many banks thus set out to spin out those units into independent commercial enterprises.
Stuart Bedford, a partner at law firm Linklaters said:
“As predicted, 2019 is turning out to be the year for consolidation in the fintech industry and, in particular, the payments sector.”
Changing Hands
Worldpay, which has provided payment processing services for more than 40 years, operated as a business unit of Fifth Third Bancorp until June 2009 when it separated as a stand-alone company. It was spun out of RBS to private-equity firms Bain Capital and Advent International in 2010.
The company listed on the London Stock Exchange in 2015, with an initial public offering valuing it at 4.8 billion pounds, the biggest flotation in London that year.
Centerview Partners and Goldman Sachs were financial advisers to FIS, the companies said, adding that Willkie Farr & Gallagher served as FIS’ legal adviser in the transaction.
In 2009 the European Commission said that RBS would have to sell WorldPay and other businesses, as a condition of approving state aid to the bank.
The next year, WorldPay was sold to private equity firms Advent International and Bain Capital for £2bn, with RBS retaining a 20% stake.
In 2013, RBS sold off its remaining stake. WorldPay went on to sell shares on the London Stock Exchange in 2015.
In January 2018, US payments processing technology firm Vantiv acquired WorldPay for $10.4bn. Vantiv renamed the combined firms WorldPay.