US firm pays $35 billion for Worldpay acquisition

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  • ‘Scale matters’, says FIS CEO
  • Worldpay is a major player in the card payments industry, particularly in the United Kingdom
  • FIS was reported pressured when its competitor Fiserve bought First Data

 

American firm Fidelity National Information Services Inc told reporters on Monday that it has agreed to purchase payments processing brand Worldpay. The firm will pay $35 billion, a deal described by observers as one of the biggest in the history of the industry. A Reuters report noted on Tuesday that the fintech sector is consolidating fast and that global payments will likely reach a $3 trillion a year revenue by the year 2023.

Millions of people and businesses transfer money internationally on a regular basis. With overseas transfer rates now more affordable for digital transfers, more will switch to digital payments. "Scale matters in our rapidly changing industry", said FIS Chief Executive Gary Norcross.

Worldpay is valued at about $43 billion, according to reports and this includes its debt. The deal with FIS came after another American firm bought a payments processor based in the United Kingdom. In January this year, US-based Fiserve Inc bought First Data Corp, a payments processing specialist, for a whopping $22 billion. FIS was reportedly under pressure after First Data was bought by Fiserve. Observers add that there are rumours that Worldpay’s Drucker was behind the Vantiv deal, another firm involved in a recent acquisition.

 

Other deals have made the news this year and some have plans to acquire other firms. However, others are seeking to increase their funds through new investors. Italy’s Nexi is reportedly planning to do an initial public offering this year.

 

Observers note that combining FIS and Worldpay would translate to an annual revenue of approximately $12 billion. Worldpay, although relatively unknown to the general public, has been processing payments for over 40 years.

"Parking the two companies together gives the enlarged business a very strong position by which to play the structural growth in digital payments. They will be able to provide clients a wider portfolio of services", said Russ Mould, the investment director at AJ Bell.

 

Worldpay shareholder and portfolio manager at Union Investment Michael Schaefer said that the American company will accelerate the revenue growth of Worldpay as well as “significantly expand its position in the merchant acquiring space and generate many synergies".

 

Worldpay shareholders are reportedly going to receive FIS shares and $11 for each share held. The company, based on this information, is valued at $112.12 per share.

 

FIS’ acquisition of Worldpay indicates the interest of the company to expand beyond financial outsourcing. With the growth of payments processing and e-commerce market, it is highly likely that the company will make a lot of money. Experts say that the move is a “diversification play”.
 

Representatives at FIS say that the deal will result in additional revenue amounting to 6 to 9%. The earnings are expected to be at $700 million in a span of three years or a little over three years.

"The deal will lead to modest EPS accretion by 2020", Norcross told analysts.

 

FIS grew by acquiring a number of companies, reports note, and that it has been doing this for the past 15 years. The company offers outsourcing services to banks, insurers and asset managers. It also offers banking software. In 2015, FIS bought financial software producer SunGard. Records show that the price


Daniel Webber
Daniel Webber
Founder & CEO
Daniel is Founder and CEO at FXcompared and has numerous years of experience in the international finance world, especially within the media, technology and property sectors. Daniel is passionate… Read more

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