FIS shares slide after the fintech group reveals planned Worldpay spin-off
By Scott Kanowsky
Investing.com — Financial technology firm FIS (NYSE:FIS) has announced it will spin off its trading solutions unit, undoing a multibillion-dollar purchase it made just four years ago, in an effort to boost growth and returns for the shareholders.
In a statement on Monday, US-based FIS said the tax-free carve-out of the division, which includes payment processor Worldpay which it bought for $43 billion in 2019, is expected to be completed within the next twelve months. The transaction will improve both companies’ performance, strengthen customer service and simplify operational management, FIS claimed.
“We are confident that this is the right time for the separation of Worldpay,” said FIS chairman Jeffrey Goldstein. “The pace of payment disruption is rapidly accelerating, requiring increased investment in growth and a different capital allocation strategy for our Merchant Solutions business.”
FIS added that Charles Drucker, who previously served as CEO of Worldpay, has been appointed as a “strategic advisor” in the spin-off process. Should the move be completed as expected, Drucker will resume his position at the helm of the company, FIS announced.
The decision is set to end FIS’ long-standing efforts to fold Worldpay into its wider corporate structure. When the deal was first unveiled, FIS claimed it had “complementary solutions and services” with Worldpay.
Since then, however, the shares in FIS have fallen by more than half their value. FIS – formerly known as Fidelity National Information Services Inc – has subsequently come under increasing pressure from activist shareholders to streamline the structure of its business to boost profits.
Analysts at Truist praised FIS for being one of the first so-called FinTech companies to break up the business, but flagged that they still see “little opportunity to materially accelerate organic revenue growth.”
In a separate announcement, FIS provided earnings guidance for the first quarter and fiscal year that missed Bloomberg consensus expectations.
Shares in FIS fell by almost a sixth in early US trading.
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