* Wave of mergers fuelled by shift away from cash
* Deal values Worldpay at about $43 bln including debt
* Worldpay shareholders to get $112.12 per share
* Cash-and-stock deal offers premium of about 14 pct (Adds quotes from source close to deal, adds analyst comment)By Justin George Varghese, Rachel Armstrong and PamelaBarbagliaMarch 18 (Reuters) - U.S. fintech Fidelity NationalInformation Services Inc (FIS) has agreed to buy paymentprocessor Worldpay for about $35 billion, the biggestdeal to date in the fast-growing electronic payments industry.The deal is part of a wave of consolidation in the financialtechnology sector as firms seek to bulk up on payment systemsthat are increasingly used for online and high street sales."Scale matters in our rapidly changing industry," said FISChief Executive Officer Gary Norcross, who will lead thecombined group that will be a global powerhouse in providing theinfrastructure for banking and payment systems.Global payments are set to reach $3 trillion a year inrevenue by 2023, according to consulting firm McKinsey, as morepeople switch from cash to digital payments."This was an opportunistic move by FIS and was primarilytriggered by the need to stay ahead of competitors," said asource close to the deal.The industry's growth has kept deals for payment systemsrolling even as merger moves in other sectors have stalled onconcerns about trade tensions and a global slowdown.U.S.-based Fiserv Inc bought payment processor First DataCorp in January for $22 billion, while Italy's Nexi plans tolist in what could be one of Europe's biggest initial publicofferings (IPOs) this year. The FIS deal, valuing Worldpay at about $43 billion whendebt is included, comes a little more than a year after U.S.firm Vantiv paid $10.63 billion for the payments firm, which wasset up in Britain and spun off from Royal Bank of Scotland in2010."Vantiv had yet to realise all the synergies from theWorldpay merger but FIS's offer was too good to be refused," thesource close to the deal said.FIS and Worldpay combined will have annual revenue of about$12 billion and adjusted core earnings of about $5 billion."By acquiring Worldpay, FIS should accelerate its revenuegrowth, significantly expand its position in the merchantacquiring space and generate many synergies," said MichaelSchaefer, portfolio manager at Union Investment, a Worldpayshareholder.Worldpay is a major player in card payments, particularly inBritain, while FIS focuses on retail and institutional banking,as well as payments.
BREADTH OF COVERAGE"You need scale to win at payments processing and this dealcertainly gives the two companies incredible breadth ofcoverage," said Russ Mould, investment director at AJ Bell.Worldpay shareholders will receive 0.9287 FIS shares and $11in cash for each share held, valuing the company at $112.12 pershare, a premium of about 14 percent based on the stocks' Fridayclosing, according to Reuters calculations.Shares in Worldpay, which has provided payment processingservices for more than 40 years, were up 10.5 percent at $108.99and Fidelity's shares were up 2.2 percent at $111.25 inpremarket trading on Monday.
The companies said the deal would result in an organicrevenue growth outlook of 6 to 9 percent through 2021, and $700million of total core earnings savings over the next threeyears.The companies said they expected $500 million of revenuesavings and aimed to deliver nearly $4.5 billion of free cashflow in three years.Under the deal, shareholders will own about 53 percent inthe combined firm and Worldpay shareholders about 47 percent.Worldpay's CEO Charles Drucker will become the executivevice-chairman.FIS, which has grown through a series of acquisitions in thepast 15 years, offering software and outsourcing services banks,asset managers and insurers.Centerview Partners and Goldman Sachs were financialadvisers to FIS, the companies said, adding that Willkie Farr &Gallagher LLP served as FIS' legal adviser in the transaction. (Additional reporting by Arathy S Nair, Simon JessopEditing by Saumyadeb Chakrabarty and Edmund Blair)
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