Financial products and services company, FIS (NYSE: FIS) trended lower in morning trading on Thursday after the company announced that it will sell its majority stake of 55% in its payments processing business, Worldpay for $18.5 billion to GTCR, including $1 billion of consideration that will depend on the returns realized by GTCR if they surpass certain thresholds.
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GTCR’s valuation of the Worldpay business implies a 9.8x multiple on adjusted EBITDA in FY23, “including estimated dis-synergies and previously unallocated corporate and other costs, which represents a material premium to FIS’ recent valuation of approximately 8-times, and is aligned with leading, scaled payments players.”
FIS will receive an upfront payment of around $11.7 billion as a part of this deal and will retain a non-controlling stake of 45% in the new standalone joint venture. As a part of this deal, FIS will use proceeds from the sale to pay off debt and stated in its press release that it will “return additional capital to shareholders through its existing share repurchase authorization, as well as for general corporate purposes, while maintaining a strong investment grade credit rating.” Meanwhile, GTCR will make an “additional equity capital investment in Worldpay of up to $1.25 billion to pursue inorganic growth opportunities.”
Analysts are cautiously optimistic about FIS stock with a Moderate Buy consensus rating based on seven Buys and four Holds.
