Worldpay Inc.’s shares have gained nearly 8% in the past two days to close at $107.16 after the payment processing firm revealed that it had signed a merger deal with Fidelity National Information Services, Inc. (NYSE: FIS), an outsourcing and financial services technology provider. Worldpay carries a combined enterprise value of about $33 billion based on stock and cash values, including Worldpay’s debt assumption that FIS anticipates recapitalizing.
Worldpay, FIS combo aims to lead global financial services
Under the terms of the agreement, when the deal is closed, Worldpay shareholders will receive 0.9287 FIS shares and $11 in hard cash for each Worldpay share. The agreement is subject to the approval of regulatory authorities and shareholders, in addition to other standard closing procedures. The transaction is anticipated to be completed in the final half of 2019.
Following the completion of the merger, FIS shareholders will retain about 53% of the joint venture, while Worldpay shareholders will hold about 47%. Worldpay, which offers payment processing solutions for vendors, enterprises, and financial firms, handles over 40 billion annual trades, backing over 300 types of payments that cover more than 120 currencies.
It is anticipated that the merged entity will be positioned to provide world-class services related to corporate banking, financial markets, payment transfers, and international eCommerce. The combined entity is also expected to record organic revenue growth of between 6% and 9% through 2021, along with EBITDA synergies of more than $700 million from the consolidation of opportunities related to revenues and expenses.
Furthermore, the merger will culminate in revenue efficiencies of $500 million, run-rate cost savings of $400 million, and free cash flow of roughly $4.5 billion in the next three years.
The merged entity will also have pro forma 2018 yearly sales and adjusted EBITDA of roughly $12.3 billion and $4.9 billion, respectively. Following the closure, the board of directors of the new entity will be composed of 12 members, out of which seven will be from the board of FIS and five from the board of Worldpay.
Gary Norcross will continue as the FIS Chairman of the Board, CEO, and President. Charles Drucker, the prevailing Executive Chairman and CEO of Worldpay, will function as the board’s executive vice president.
The joint venture will continue to have FIS as its official name, with headquarters at Jacksonville, Florida.
Commenting on the merger FIS CEO Gary Norcross said: “Scale matters in our rapidly changing industry. As a combined organization, we will bring the most modern solutions targeted at the highest growth markets.”
Lisa Ellis, an analyst at MoffettNathanson, said the FIS-Worldpay merger “reinforces the transformational and disruptive impact that e-commerce is having on payments. In-store payments are very local and difficult to scale, whereas e-commerce has significant benefits to scale, and is very global.”
Technically, the stock is trading above its 50-day moving average. Furthermore, the unexpected merger announcement has resulted in a gap up opening. The stochastic oscillator is also in the bullish zone. As a result, we can expect the stock to consolidate and rise further.
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