Fidelity National Information Services Inc (FIS) is buying Worldpay Inc for about US$35 billion to combine forces as financial transactions increasingly move online.
The payment service industry works behind the scenes to help complete the process for purchases.
It was a simpler exercise when those transactions took place in person with a swipe of a card, but transactions have largely moved online and grown in complexity, forcing those background players to deal with multiple currencies, various forms of payment and more at lightning speed.
The industry now also faces a growing base of start-up competitors.
Fidelity is a more traditional payment service provider, supporting more staid practices such as bank transactions.
Worldpay is the “crown jewel” of the e-commerce niche, Instinet Inc analysts Dan Dolev and Conan Leon said.
It has grown quickly as the companies that it services have grown, and that makes it an attractive acquisition target, they said.
Worldpay processes more than 40 billion transactions per year and supports more than 300 payment types across more than 120 currencies.
Combined, Worldpay and FIS would have had revenue of US$12.3 billion last year.
The deal represents the biggest acquisition for FIS since it spent more than US$5 billion for SunGard Data Systems in 2015.
A number of established players have consolidated recently in order to adapt, particularly in light of increased competition.
In a similar move, Fiserv Inc in January announced that it was buying First Data Corp in a US$22 billion all-stock deal.
That created a giant in the payment and financial technology sector at the time, but Dolev said that Worldpay represents a much more notable purchase, given its size and reach.
“Scale matters in our rapidly changing industry,” FIS chairman and CEO Gary Norcross said. “Upon closing later this year, our two powerhouse organizations will combine forces to offer a customer-driven combination of scale, global presence and the industry’s broadest range of global financial solutions.”
Worldpay shareholders would receive 0.9287 FIS shares and US$11 in cash for each Worldpay share they own.
FIS shareholders would own about 53 percent of the combined company, which is to keep the name Fidelity National Information Services.
Worldpay shareholders would own approximately 47 percent of the new entity.
Worldpay was originally a British company that was acquired less than two years ago by Cincinnati, Ohio-based Vantiv, which then took on the Worldpay name.
The new combined company is to be based in Jacksonville, Florida, where FIS is headquartered.
Norcross would continue as CEO and chairman, while Worldpay executive chairman and CEO Charles Drucker is to become executive vice chairman.
With Worldpay’s debt included, the companies put the deal’s value at US$43 billion, saying that they expect organic revenue growth of between 6 percent and 9 percent through 2021.
The deal, pending regulatory and shareholder approval, would likely close in the second half of this year.
Worldpay shares on Monday jumped nearly 10 percent to US$108.51, while FIS shares edged down US$0.76 to close at US$108.12, as the broader US market ended trading higher.
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