Payments giant Fidelity National Information Services today confirmed plans to spin off its merchant services business into its own publicly traded company.
Why it matters: FIS is undoing one of the biggest fintech acquisitions ever — Worldpay — after recognizing the two were better off as separate entities.
Background: FIS acquired Worldpay in 2019 for $43 billion amid a frenzy of payments tie-ups, including that of Fiserv's $22 billion purchase of First Data.
- FIS's operations however have come under intense scrutiny in recent months.
- D.E. Shaw and activist hedge fund JANA Partners both have clamored for changes at the company.
- Changes are, indeed, coming. FIS is now "returning to its roots," new CEO Stephanie Ferris said during today's earnings call.
Of note: Roughly 30% of FIS's revenue comes from merchant services, the lion's share of which can be attributed to Worldpay.
Details: The tax-free spinoff is expected to be completed within 12 months, with FIS shareholders expected to receive a pro-rata distribution of shares in Worldpay.
- Former Worldpay CEO Charles Drucker has been appointed as strategic advisor in the spinoff and will return to his former role once the deal has been completed.
- Competition in payments has been fierce, and Worldpay's growth has stalled under FIS ownership. Spinning out the business, Ferris believes, could give the new company the capital it needs to conduct M&A.
- "As you can see from the results of this segment ... it has a different capital allocation structure," she said. "I as the parent can't feed it the M&A it needs."
