FIS forms global fintech powerhouse for US$35b
Print Edition
US fintech Fidelity National Information Services Inc has agreed to buy payment processor Worldpay for about US$35 billion, the biggest deal to date in the fast-growing electronic payments industry.
The deal is part of a wave of consolidation in the financial technology sector as firms seek to bulk up on 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 that will be a global powerhouse in providing the infrastructure for banking and payment systems.
Global payments are set to reach US$3 trillion a year in revenue by 2023, according to consulting firm McKinsey, as more people switch from cash to digital payments.
“This was an opportunistic move by FIS and was primarily triggered by the need to stay ahead of competitors,” said a source close to the deal.
The industry’s growth has kept deals for payment systems rolling even as merger moves in other sectors have stalled on concerns about trade tensions and a global slowdown.
US-based Fiserv Inc bought payment processor First Data Corp in January for US$22 billion, while Italy’s Nexi plans to list in what could be one of Europe’s biggest initial public offering this year. The FIS deal, valuing Worldpay about US$43 billion including debt, comes a little more than a year after US firm Vantiv paid US$10.63 billion for the payments firm, which was set up in Britain and spun off from Royal Bank of Scotland in 2010.
“Vantiv had yet to realize all the synergies from the Worldpay merger but FIS’ offer was too good to be refused,” the source close to the deal said. FIS and Worldpay combined will have annual revenue of about US$12 billion and adjusted core earnings of about US$5 billion.
“By acquiring Worldpay, FIS should accelerate its revenue growth, significantly expand its position in the merchant-acquiring space and generate many synergies,” said Michael Schaefer, portfolio manager at Union Investment, a Worldpay shareholder.
Worldpay is a major player in card payments. FIS focuses on retail and institutional banking and payments.
“You need scale to win at payments processing and this deal certainly gives the two companies incredible breadth of coverage,” said Russ Mould, investment director at AJ Bell.
The companies said the deal would result in an organic revenue growth outlook of 6 to 9 percent through 2021.
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