(Bloomberg)—Fidelity National Information Services Inc. (FIS) agreed to acquire Worldpay Inc. for about $34 billion in cash and stock, the biggest deal ever in the international payments sector.
The industry is at the heart of a dealmaking boom as consumers change the way they pay for goods and legacy providers are challenged by rivals from startups to Apple Pay. Industrywide revenue is projected to surge to $2.4 trillion by 2027, according to a report from Boston Consulting Group and Swift.
FIS, which focuses on the software behind payments for retail and banking, will assume Worldpay’s debt, bringing the enterprise value of the deal to about $43 billion, the companies said Monday. Current shareholders of Jacksonville, Florida-based FIS will own about 53% of the combined company, while Worldpay investors will hold 47%.
“The transaction essentially expands FIS’s capabilities by enhancing its acquiring and payments offerings while increasing WP’s distribution footprint, and accelerating its entry into new geographies,” Moshe Katri, an analyst at Wedbush, said in a note to clients.
Worldpay handles payment processing for 27 retailers in the Internet Retailer 2018 Top 1000, such as DSW Inc. (No. 153), Wayfair Inc. (No. 13) and Overstock.com Inc. (No. 32). FIS handles those services for three retailers in the Top 1000, including Apple Inc. (No. 2), Best Buy Co. Inc. (No. 8) and Hudson’s Bay Co. (No. 36).
Worldpay shareholders will receive $11 a share in cash and 0.9287 of a FIS share, which is worth a combined $112.12 as of last week’s close. That was 14% more than Friday’s closing price for Symmes Township, Ohio-based Worldpay. The stock jumped 8.7% to $107.28 at 9:53 a.m. in New York, after reaching at high as $112. Fidelity National declined 1.4% to $107.39.
Payments companies earn fees from charging to service the billions of dollars of purchases made by consumers and businesses, and many have been turning to deals to grab market share. The rise of contactless payments, and the need to update backend infrastructure, also have spurred mergers. Both FIS and Worldpay provide the technological infrastructure that lets consumers securely pay an overseas vendor on an e-commerce site or tap their cards to buy a cup of coffee.
The largest payments firms, such as Worldpay, Chase Paymentech and First Data, each handle about $1 trillion annually. Fast-growing Dutch rival Adyen NV is expanding by offering to handle transfers in more currencies and payment types than its competitors.
Today’s deal, when completed, will make the combined company the biggest in the processing and payments industry, according to data compiled by Bloomberg. It will surpass Fiserv Inc., which agreed in January to pay $22 billion to buy First Data Corp.
Initial public offerings have been climbing, too. Italy’s Nexi SpA said Monday that it plans an IPO in Milan by the end of April, aiming to raise as much as 2.7 billion euros ($3.1 billion), according to people familiar with the plan. Adyen was one of the best-performing IPOs globally in 2018. Network International, a Middle Eastern payments processor, on March 14 announced its plan for a London IPO in the next four weeks.
Worldpay’s CEO, Charles Drucker, will become the combined firm’s executive vice chairman. His company was itself created by a merger: Vantiv Inc. bought the former Worldpay Group Plc for more than $10 billion in 2017 to gain greater exposure to ecommerce retailers and small businesses, with the combined company taking the British firm’s name. Worldpay Group was once part of Royal Bank of Scotland Group Plc, while Vantiv’s roots are in Fifth Third Bancorp.
“Organizations of all types and sizes are looking for new ways to create more meaningful and frictionless experiences and grow their share of wallet through digital channels,” the companies said. “FIS and Worldpay have complementary solutions and services” for banks as well as retailers, and also offer loyalty programs and anti-fraud products, they said.
The combined firm will serve the “high-growth ecommerce industry” and have revenue of about $12 billion, the companies said in their statement. Gary Norcross, FIS’s CEO, will be chairman and CEO.
Centerview Partners LLC, Goldman Sachs Group Inc. and Willkie Farr & Gallagher LLP advised FIS, while Worldpay used Credit Suisse Group AG and Skadden, Arps, Slate, Meagher & Flom LLP.