FIS - Worldpay Deal Gets Buyouts Halfway Back To Normal
2023-07-07 23:10:00 ET
Summary
- Less than five months after announcing plans to spin off its payments arm, Worldpay, financial technology giant Fidelity National has instead found a willing bidder in buyout shop GTCR.
- he deal defies weak debt and M&A markets, but it also requires flexing fundraising muscles to underpin a huge cash outlay.
- GTCR will acquire a 55% stake in Worldpay, valuing it at $17.5 billion including debt.
By Breakingviews
Dealmaking is creeping back to normal – almost. Less than five months after announcing plans to spin off its payments arm, Worldpay, financial technology giant Fidelity National Information Services ( FIS ) has instead found a willing bidder in buyout shop GTCR. The deal defies weak debt and M&A markets, but it also requires flexing fundraising muscles to underpin a huge cash outlay.
GTCR will acquire a 55% stake in Worldpay, valuing it at $17.5 billion including debt. For the seller, opting to take the certainty of even a partial sale over the vagaries of a stock market listing makes sense.
Worldpay has struggled to keep pace with competitors such as PayPal’s ( PYPL ) Braintree and Adyen ( ADYEY ), and management expects its sales to decline modestly this year, which could make public market investors nervous.
The deal also locks in a rich valuation multiple of 9.8 times Worldpay’s expected EBITDA this year, a premium to FIS’s own valuation. And that has room to grow: GTCR will kick in an extra $1 billion if the business performs well enough.
There are still some messy elements. GTCR is paying a pretty penny to clinch the deal. Debt will add up to a bit over 4 times Worldpay’s EBITDA, according to a person familiar with the matter, leaving nearly $10 billion in equity value.
Subtract FIS’s continuing 45% stake, and GTCR will have to stump up more than $5 billion in cash upfront. That’s a very concentrated bet, totaling around 15% of its roughly $35 billion in assets under management.
If the deal goes to plan, however, it could mark something of a revival for private equity, whose transaction volume slumped 56% in the second quarter from a year earlier, according to a June 30 Reuters report .
Coming off the heels of a record fundraising in May, GTCR also could split the giant Worldpay equity check across its new $11.5 billion fund and a previous one, which would help soften the blow.
And it is no small feat that the buyout shop lined up a group of banks to fund its megadeal at a time when debt is hard to come by. GTCR’s fellow buyout barons may well leverage this deal to get back to business.
Context News
Financial technology company Fidelity National Information Services said on July 6 that it had agreed to sell a 55% stake in its payments processing arm, Worldpay Merchant Solutions, to private equity firm GTCR.
FIS expects to net $11.7 billion in net proceeds from the deal, which values Worldpay at $17.5 billion including debt. GTCR will pay an additional $1 billion if its returns exceed certain thresholds.
GTCR plans to fund half of the deal with equity and the other half with debt, Reuters previously reported. JPMorgan and Goldman Sachs are among the banks funding the deal, according to GTCR’s announcement.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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Worldpay Deal Gets Buyouts Halfway Back To Normal