NEW YORK – Fidelity National Information Services said on Monday it has agreed to acquire Worldpay for about $35 billion in cash and stock, creating a global payments giant in a bid to reach more customers as merchants and their clients complete an increasing number of transactions online.
The deal marks one of the biggest transactions in the fast-consolidating payments sector that is under pressure to cut costs, develop new products and add customers. It comes at a time of greater regulatory scrutiny and rising competition from technology startups that are squeezing fees. In 2017, Worldpay Group, the predecessor company of Worldpay, was itself acquired by US rival Vantiv for 8 billion pounds ($10.6 billion).
For Fidelity National Information Services, widely known as FIS, the acquisition would also be by far its biggest bet since it acquired rival financial software company Sungard for $5.1 billion in cash and stock in 2015.
Under the deal, shareholders of Worldpay, which is based in Cincinnati, Ohio, shareholders will receive 0.9287 in FIS shares and $11.00 in cash for each share of Worldpay. That values Worldpay’s shares at $112.12 each, representing a takeover premium of almost 14 percent to Worldpay’s stock price based on Friday’s closing prices for each company in New York.
FIS shareholders will own about 53 percent of the company and Worldpay shareholders will own about 47 percent.
The companies said the combined entity expects to generate $500 million in additional revenue and annual cost cuts of about $400 million through combining their one-stop shop services to process online and in-store payments and manage transactions in multiple currencies. The combined entity, which expects to have annual revenue of about $12.3 billion, also will offer services to manage fraud and advanced data analytics, the companies said.
FIS helps banks process credit-card transactions, service auto loans and handle back-office functions for money managers among a range of services that it offers. The company says its technology is used in managing transactions involving more than $9 trillion annually. By acquiring Worldpay, it will gain access to the 40 billion e-commerce and other types of transactions Worldpay processes yearly. Together, the newly created company would operate in more than 276 countries globally.
The tie-up would allow FIS and WorldPay to offer their services to each others’ customers in a bid to boost total revenue of the combined entity while eliminating duplicate operations to generate cost savings.
The new company will be called FIS and based in Jacksonville, Fla., and estimates it will be able to generate free cash flow of nearly $4.5 billion in three years following the deal’s closing.
Gary Norcross, FIS’s current chief executive and chairman, will retain those roles at the combined company. Worldpay’s chief executive Charles Drucker will serve as executive vice chairman of the board, the companies said.
The combination of stock and cash values Worldpay at an enterprise value of approximately $43 billion, including the assumption of Worldpay debt, which FIS expects to refinance.