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US financial technology group Fidelity National Information Services has agreed to sell a majority stake in its merchant payments arm Worldpay to private equity firm GTCR, valuing the business at up to $18.5bn in one of the largest corporate carve-outs in history.
In helping to unwind FIS’s $30bn-plus 2019 acquisition of Worldpay, GTCR will finance its purchase with more than $8bn in bank debt financing, the largest package of its kind for a new private equity buyout since capital markets unravelled in the spring of 2022 when the Federal Reserve began aggressively raising interest rates.
The Financial Times reported last week that FIS was in talks with GTCR and Advent International to sell a majority stake in Worldpay. GTCR ultimately prevailed in an auction that FIS’s advisers — Goldman Sachs, JPMorgan and Centerview Partners — presented to several large buyout firms, said two sources familiar with the matter.
FIS will receive net proceeds of $11.7bn and retain a 45 per cent stake in Worldpay, representing a shift in strategy after it told investors in February it planned to spin off the unit to stockholders. The Florida-based company said on Thursday it plans to use the cash to pay down debt and fund share buybacks.
Chicago-based GTCR will invest more than $5bn of equity into Worldpay, and values FIS’s 45 per cent equity interest at about $4.5bn, according to sources familiar with the matter.
The private equity firm will finance its purchase with $8.4bn in debt raised by a syndicate of lenders led by Goldman and JPMorgan, said sources familiar with the matter. Citigroup, Wells Fargo, UBS and Deutsche Bank are also participating in the financing.
This marks a potential return by lenders to financing large private equity buyouts. Many banks had for the most part demurred from financing takeovers after several “hung deals” where they struggled to offload the debt to third-party investors.
GTCR is valuing Worldpay at 9.8 times its expected fiscal 2023 adjusted earnings before interest, taxation, depreciation and amortisation for an upfront valuation of $17.5bn. The valuation could reach $18.5bn based on the returns the firm earns from the deal. The company will also benefit as a large minority shareholder from any future increase in Worldpay’s value.
FIS shares closed 1.2 per cent lower on Thursday in New York, alongside a broader market sell-off, but had jumped 6 per cent on Monday after the FT’s initial report.
“This transaction allows FIS to partially monetise our merchant solutions business at an attractive valuation and provides certainty for all stakeholders,” chief executive Stephanie Ferris said in a statement.
GTCR has long been an investor in the payments sector and even sold a business to Worldpay for more than $1bn in 2010. Thursday’s acquisition is the largest in the firm’s history, said sources familiar with the matter.
Collin Roche, co-chief executive of GTCR, said in a statement that the firm had “tremendous confidence in the opportunity for sustained, long-term growth at Worldpay”.
Worldpay is no stranger to private equity ownership, having been acquired by Advent and Bain Capital in 2010 from Royal Bank of Scotland for $3bn as part of the British lender’s financial crisis bailout.
The firms listed the company on the London Stock Exchange in 2015, earning billions in the process. Vantiv, which Advent had carved out of US regional lender Fifth Third Bank, merged with Worldpay two years later in a deal that then valued the combined entity at more than £22bn.
FIS bought Worldpay in 2019 as a wave of consolidation hit the payments industry and it sought to expand its footprint in the payments industry.
However, FIS struggled to combine the two businesses and last year came under pressure from activist investors such as DE Shaw to review its strategy.
The majority of GTCR’s equity commitment will come from two of its funds, and be split about evenly between its $7.9bn Fund XIII, raised in 2020, and its $11.5bn Fund XIV, which was closed in May, said a source familiar with the matter. Large GTCR investors will also invest directly in the Worldpay deal as co-investors.
