FIS selling a majority stake in Worldpay to GTCR
FIS has officially agreed to sell a majority stake in Worldpay to private equity firm GTCR in a deal that values the merchant services business at up to $18.5 billion.
Why it matters: The deal unwinds FIS' 2019 acquisition of Worldpay, but it could foretell more private equity dealmaking in the payments space.
Context: A deal was widely expected after reports emerged that FIS would reverse course on spinning Worldpay off as a publicly traded company and sell to private equity instead.
Details: GTCR will pay FIS about $11.7 billion upfront for a 55% stake in the new privately owned joint venture.
- The deal values Worldpay itself at $17.5 billion, with an additional $1 billion of consideration contingent on returns realized by GTCR exceeding certain thresholds.
- The transaction is expected to close by the first quarter of 2024, subject to regulatory approvals and other closing conditions.
Of note: As previously announced, Worldpay’s former executive chairman and CEO Charles Drucker will become CEO once again when the deal closes.
- He and FIS chief executive Stephanie Ferris — former CFO at Worldpay before the 2019 acquisition — will join the board of the new standalone company.
Between the lines: FIS plans to use the cash proceeds to shore up its balance sheet, pay down debt and return capital to shareholders through share buybacks.
- Following the close of the deal, FIS’ ownership interest in Worldpay will be reported as income from a minority interest.
What we're watching: In addition to the upfront cash, GTCR has committed up to $1.25 billion to pursue inorganic growth opportunities — i.e., potential M&A in the payments space.
What they're saying
In a conversation with Axios' Dan Primack, GTCR co-CEO Collin Roche says any acquisitions would probably be focused on product, plus perhaps a bit of added geographic coverage.
- "A lot of the time, you see smaller businesses with innovative products but not the scale to exploit it; we have scale."
- FIS had previously signaled plans to spin off Worldpay via an IPO, but GTCR has no short-term plans to bring its new portfolio company public.
- Perhaps most surprising is that GTCR found bank financing, with Roche saying the firm employed a "fairly conversative cap structure" with leverage in the "low to mid 4's on EBITDA."