American fintech FIS spins out Worldpay payment business
US financial technology group FIS has said it will spin off Worldpay, the payments business it bought for $43 billion just four years ago, after it failed to integrate the two companies.
Formally known as Fidelity National Information Services, the company acquired Worldpay in 2019 to create one of the largest providers of financial infrastructure underpinning the bank payments sector. FIS said on Monday that the tax-free split it was pursuing would unlock shareholder value, contradicting arguments made when it combined the groups as “scaling significance in our rapidly changing industry”.
FIS’s decision to break up comes after activist shareholders DE Shaw and Jana Partners asked the company to overhaul its business strategy, including considering undoing the 2019 deal.
Shares in Jacksonville, Fla.-based FIS have fallen about 45 percent since it completed its acquisition of Worldpay in July 2019 from Vantiv. The company’s share price fell more than 14 percent in Wall Street trading on Monday morning.
“The pace of payment disruption is rapidly accelerating, requiring increased investment in growth and a different capital allocation strategy for our Merchant Solutions business,” said Jeffrey Goldstein, chairman of FIS.
“This spin-off will create two industry-leading, publicly traded companies with sharper focus and increased agility, each well positioned to capitalize on the significant value creation opportunities that lie ahead in their respective markets.”
FIS’s acquisition of Worldpay in 2019 was a response to a wave of deals in the payments sector, including Fiserv’s acquisition of rival First Data, as smaller players came together to provide more convenient offerings for merchants and consumers.
The idea behind the deal was to have two businesses that would mutually benefit each other and generate more than $4 billion in free cash flow annually in an industry where bigger is considered better. However, the payments arm has struggled since the acquisition of FIS, which has made the price it paid look steep.
FIS accelerated the management changes in December to try to quell shareholder discontent. Stephanie Ferris took over as CEO two weeks earlier than planned and Gary Norcross, the former boss who was expected to become CEO, left the company altogether.
Charles Drucker, the former head of Worldpay, has been appointed as a strategic adviser to help with the spin-off and will be reinstated in his previous role once it is completed.
FIS said shareholders would receive a proportional distribution of the Worldpay stock, but did not specify the number of shares that would be distributed and said the structure of the spin-off had not yet been determined. The company expects the separation to be completed within a year.
