FIS, Worldpay Acquisition To Create Global Fintech Powerhouse

The upcoming merger between financial technologies provider Fidelity National Information Services Inc (FIS) and payment processor Worldpay Inc. will create a global powerhouse in the burgeoning fintech sector.

FIS has announced the acquisition of the British firm for more than $35 billion in a cash and stock deal. The FIS deal will value Worldpay at some $43 billion when debt is included.

The FIS, Worldpay merger will create a market leader with annual revenue of $12 billion and adjusted core earnings of $5 billion.

FIS focuses on retail and institutional banking, as well as payments, while Worldpay is a major player in card payments (especially in the United Kingdom). Worldpay has provided this service for more than four decades. FIS was ranked the Number One financial technology company in 2013 and 2014.

Worldpay shareholders will receive 0.9287 FIS shares and $11 in cash for each share held, valuing the company at $112.12 per share. This sum represents a premium of about 14 percent based on the stocks’ Friday. Shares in Worldpay rose 10.5 percent at $108.99 in premarket trading Monday.

Both firms said the deal will result in an organic revenue growth outlook ranging from 6 percent to 9 percent through 2021. They expect to realize $700 million in total core earnings savings over the next three years as a result of the consolidation.

The companies said they expected $500 million of revenue savings and aimed to deliver nearly $4.5 billion of free cash flow in three years. FIS shareholders will own about 53 percent in the combined firm and Worldpay shareholders about 47 percent.

Analysts say this is the biggest such deal in the rapidly growing electronic payments industry. Global payments are on track to hit $3 trillion a year in revenue by 2023 as more people switch from cash to digital payments, said management consulting firm McKinsey & Company.

The huge deal is part of a wave of mergers and acquisition in the fintech sector. More and more fintech firms are putting more muscle into their payment systems that are increasingly used for online and high street sales.

“Scale matters in our rapidly changing industry,” said FIS CEO Gary Norcross, who will lead the combined group. Worldpay’s CEO Charles Drucker will become the combined firm’s executive vice-chairman.