Monday, June 17th, 2019
In the largest fintech and payments deal ever – and one of the most talked about – Fidelity National Information Services Inc and Worldpay Inc agreed to merge in March. This merger will form a new payments and financial services powerhouse. Industry experts are saying it is a testament to the changing landscape in the financial services industry.
According to the terms of the agreement, Worldpay shareholders will receive 0.9287 Fidelity National shares and $11 in cash for each share. Here are a few things investors need to know about the merger:
Whopping $43 Billion
Upon the completion of the deal, FIS will own approximately 53 percent of the newly formed company. Worldpay shareholders will hold the remaining 47 percent. The combination of stock and cash values the merger at about $33. However, when Worldpay’s debt is included, the deal’s value inflates to a whopping $43 billion.
New Revenue Opportunities
Immediately following the announcement of the deal, a conference call took place (transcribed by S&P Global Market Intelligence) in which the management teams from the two separate companies shared their take on the merger. Each agreed that the combined entity will be able to take advantage of new revenue opportunities and cost synergies that they would not be possible to separately.
FIS now expects to generate $4.5 billion in free cash flow in three years and realize $500 million in revenue synergies. As far as cost synergies, Fidelity National CFO James Woodall says the company expects to see $400 million in savings.
According to him, these cost synergies will be driven by combining, “issuing and acquiring capabilities from both companies, technology integration as we drive efficiencies in technology and data center costs and corporate costs through functional alignment of the combined company.”
Reactive or Proactive?
It’s worth mentioning that this deal comes just after another major merger between Fiserv Inc and First Data Corp. earlier this year. These two processors are the country’s two largest issuer processors; they process payments for retail banks, which serve consumers. Ultimately, this deal will strengthen and transform processing capabilities on both sides of the transaction for banks and merchants.
The big question is whether the latest deal – between FIS and Worldpay – is reactive or proactive? Those on the inside insist the deal was made purely for strategic purposes, not because of the direction the industry is moving. Even so, FIS CEO Gary Norcross later added that: “[T]here’s a lot of innovation going on. There’s a lot of modernization going on. Our clients need to continue to look to compete in this very aggressive market.”
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