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Fidelity National (FIS) Completes Acquisition of Worldpay

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Fidelity National Information Services (FIS - Free Report) has closed the deal to acquire Worldpay, a leading payment processing company, in a stock-cash deal worth $43 billion. The deal was announced in March 2019.

The combined company will retain the acquirer’s name and will be headquartered in Jacksonville, FL. Also, it will have above $12 billion in pro forma revenues and more than 55,000 employees.

Fidelitychairman, president and CEO Gary Norcross said, “This transformative combination significantly enhances the scale, portfolio and global footprint of FIS to help our clients capitalize on growth opportunities at a time of rapid marketplace change.”

Per the terms of the deal, shareholders of Worldpay received 0.9287 Fidelity shares and $11.00 in cash for each share held.

The companies decided to have 12 members in its board of directors, of which seven are from Fidelity. Norcross will remain Fidelity’s chairman of the board, president and CEO, whereas Charles Drucker, Worldpay’s current executive chairman and CEO, will serve as the executive vice chairman.

At the time of merger announcement,it was expected that the combined entity will aid in revenue growth of 6-9% through 2021, as the deal will create significant opportunities across merchant and banking businesses. Also, total EBITDA synergies of $700 million are likely to be achieved from the combination of revenues and expense opportunities over the next three years.

Fidelity anticipates retaining its investment grade credit ratings of Baa2/BBB, reducing leverage to approximately 2.7x over 12-18 months and continuing to grow its dividend, supported by robust free cash flow.

The combination of the two companies, which are leaders in their respective markets in modernization investments, will provide clients of both organizations access to a wider portfolio of digital assets for accelerating revenue growth, streamlining operations and creating better engagement with customers.

The booming payments industry has been seeing some consolidations. In May 2019, Global Payments (GPN - Free Report) agreed to buy Total System Services in a deal valued at $21.5 billion, marking the industry’s third mega-merger of the year. Another successful merger was of Fiserv whereby it bought First Data Corporation for $22 billion to become the world’s largest payments processor.

Our Take

Fidelity’s attractive core business, with a recurring revenue model and investment in digital products, keeps it well positioned for growth. Also, its strong capital position enables the company to undertake opportunistic expansion strategies.

The company's shares have gained 11.4% over the past three months against 4.8% decline recorded by the industry.

Fidelity currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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