FIS advances separation plan, offloading Worldpay stake to GTCR funds

FIS, a global powerhouse in financial services technology, announced today the acceleration of its prior plan to separate into two distinct global entities, thereby improving strategic flexibility. To this end, FIS has signed a definitive agreement to divest a majority stake in its Worldpay Merchant Solutions business to private equity funds managed by GTCR.

The transaction, which pegs Worldpay’s value at $18.5 billion, includes a conditional consideration of $1 billion, which depends on GTCR returns exceeding specific thresholds.

Collin Roche — GTCR Co-CEO and Managing Director said: “We are thrilled to be working with Charles and the Worldpay leadership team to build on the company’s culture of innovation, invest in new capabilities and advance its leadership position across channels and geographies.

“As a firm, we have a long history of investing in the payments sector, and that experience provides us with tremendous confidence in the opportunity for sustained, long-term growth at Worldpay. We look forward to partnering with FIS to deliver value for customers and other stakeholders.”

Under the terms of the agreement, the upfront valuation of Worldpay stands at $17.5 billion. This valuation represents a 9.8-times multiple based on the expected fiscal 2023 adjusted EBITDA, inclusive of estimated dis-synergies and previously unaccounted-for corporate and other expenses.

If the $1 billion contingent consideration materializes, the transaction multiple could rise to approximately 10.4-times. FIS will receive upfront net proceeds of approximately $11.7 billion upon closure. The company anticipates leverage to be around 2.5-times, based on 2023 Adjusted EBITDA upon closure.

This transaction has been formulated to optimize shareholder value, offering an immediate gain from a $17.5 billion valuation and the potential for additional benefits. FIS is slated to receive upfront net proceeds of about $11.7 billion, retaining a non-controlling 45% interest in a new standalone joint venture.

The FIS Board of Directors unanimously approved the transaction, reflecting its strategic significance.

Following this move, both FIS and Worldpay will benefit from enhanced management focus and operational simplification. The cash proceeds generated upfront will provide FIS with immediate capital allocation flexibility.

Funds from the sale will be directed towards debt repayment, existing share repurchase authorizations, and general corporate purposes, all while maintaining a strong investment grade credit rating. Concurrently, GTCR has committed up to $1.25 billion in additional equity capital investment in Worldpay to explore inorganic growth opportunities.

Worldpay, which recorded $2 trillion in payments volume in 2022 and stands among the largest global merchant acquirers by transactions, will continue to serve as a commerce solutions leader for merchants of all sizes.

Charles Drucker will assume the role of CEO of Worldpay upon transaction closure.

FIS is set to continue its operations as a leading provider of financial technology solutions for financial institutions, capital markets firms, corporates, and developers worldwide. It will still benefit from its strong brand, wide-ranging domain expertise and portfolio breadth, solid long-term client relationships, and its global distribution and scale.

Stephanie Ferris — FIS CEO and President said: “This transaction allows FIS to partially monetize our Merchant Solutions business at an attractive valuation and provides certainty for all stakeholders.

“It also allows us to simplify and drive greater focus on delivering innovative, next-generation financial technology and software solutions. At the same time, Worldpay will become a privately held company and benefit from the resources and expertise of GTCR, which has committed additional capital to allow Worldpay to pursue inorganic growth in the rapidly evolving payments space.”

The transaction is expected to close by Q1 2024, pending regulatory approvals and other standard closing conditions. After the deal closes, FIS’ ownership stake in Worldpay will be reported as income from minority interest.

As part of the separation strategy, FIS and Worldpay will enter into commercial agreements, which will preserve the key value proposition for both businesses’ clients and mitigate potential dis-synergies. These agreements will provide Worldpay continued access to FIS products to resell to its clients, as well as access to FIS’ financial institution clients as it continues to scale its bank channel.

Similarly, FIS will retain access to Worldpay’s portfolio of commercial clients to resell its embedded finance offerings.