On Our Radar: Deals we are paying attention to for their impact on industry.
Fidelity National Information Services Inc. (FIS), a Florida-based fintech giant, announced its purchase of payment processing and technology provider Worldpay Inc. in a statement on Monday as the two companies pursue scale, synergies and industry leadership position.
The combined organization will focus on “fraud optimization, faster payments and data-driven offerings,” said Gary Norcross, chairman, president and chief executive officer of FIS, on a call with analysts on Monday.
FIS is paying $34 billion in cash and stock for Worldpay. FIS called the value of a transaction a “fair price” for this growth-oriented move. The deal, set to close in the second half of 2019, compares to the $22 billion acquisition of First Data Corp. by Fiserv Inc. earlier this year.
“The FIS/Worldpay deal accelerates race to scale in payments,” wrote Brett Huff, an analyst at Stephens Inc., in a research note to clients on Monday. “The deal is a key pivot point in FIS revenue growth trajectory and market should give the combined Co a much better multiple as a result.”
Ohio-based Worldpay, which processes 40 billion payments per year, spends 10% of its revenue on technology and innovation, compared with 7.5% in innovation spend for FIS, the company said. The companies estimate 6-9% in organic revenue growth through 2021, in conjunction with $700 million of total EBITDA synergies over three years.
The two companies clearly view their combined geographic reach and synergies from technology integration as key to their ability to compete in an industry that is becoming increasingly competitive.
“The market is moving, there is a lot of M&A, a lot of modernization going on — our clients continue to look to compete, it’s a very aggressive market, you have disruptors coming in,” Norcross noted. “So what we saw in the combination is this end-to-end innovation to be able to have access to world-class merchants and leverage data, the need to drive products with much faster speed. The need to drive scale is going to matter to compete in the future.”