FIS plans to spin off Merchant Solutions business
FIS (NYSE:FIS), a global leader in financial services technology, today announced plans to pursue a tax-free spin-off of its Merchant Solutions business to strengthen its strategic and operational focus, capitalize on growth opportunities and unlock shareholder value.
The two companies expect to maintain a strong commercial relationship, preserving a key value proposition for clients of both businesses. FIS expects the spin-off to be completed within the next 12 months.
FIS’ Board and management determined as part of their previously announced and ongoing strategic review that a spin-off of Merchant Solutions, to be named Worldpay, offers the best path to enhance shareholder value, including by:
- Increasing strategic and operational focus to capitalize on growth and margin potential
- Aligning capital allocation and capital structures with long-term growth targets and underlying market needs, including potentially participating in M&A
- Enhancing the ability to align talent with shareholder returns, including through competitive and focused equity compensation programs
“In evaluating a broad range of alternatives as part of our previously announced comprehensive assessment of FIS’ strategy, businesses, operations, and structure, FIS management and the Board concluded that the spin-off of Worldpay will unlock shareholder value by improving both companies’ performance, enhancing client services, and simplifying operational management,” said Jeffrey A. Goldstein, Chairman of the Board.
“We are confident that this is the right time for the separation of Worldpay. The pace of disruption in payments is rapidly accelerating, requiring increased investment in growth and a different capital allocation strategy for our Merchant Solutions business. This spin-off will create two industry-leading, publicly traded companies with sharper focus and increased agility, each well positioned to capitalize on the significant value creation opportunities ahead in their respective markets.”
CEO and President Stephanie Ferris said:
“Specifically, the separation will enable FIS to target a strong investment grade credit rating, while allowing Worldpay to invest more aggressively for growth. We believe this approach will best position us to drive innovation and deliver the most competitive products and solutions, benefitting our employees, clients, partners and shareholders.”
Upon completion of the proposed spin-off, the Merchant Solutions business will operate as Worldpay, reestablishing and strengthening a brand that remains highly trusted among clients and partners.
Worldpay, the largest global merchant acquirer1 by transactions with $2 trillion in payments volume in 2022, will remain a leading provider of integrated payment technology solutions for eCommerce, enterprise, and small and medium sized businesses (SMB). Worldpay is a leader in cross-border eCommerce, with $4.8 billion of revenue and $2.3 billion of Adjusted EBITDA in 2022. The business’ revenue was comprised of 43% enterprise, 27% SMB, and 30% eCommerce in 2022.
FIS announced Charles Drucker has been appointed as a strategic advisor to aid with the spin-off process, effective immediately. The Company also announced today that, if the spin-off is completed as expected, he will serve as CEO of Worldpay. Drucker, a proven value creating CEO who previously served as CEO of Worldpay, brings decades of experience within the financial technology industry and a strong track record of shareholder value-creation.
The remainder of the Worldpay Board of Directors, management team, and headquarters will be announced at a later date. Worldpay and FIS will continue to maintain a commercial relationship to deliver critical capabilities like embedded finance and loyalty through premium payback, with customary commercial agreements in place to ensure continuity for clients.
Following the separation, Stephanie Ferris will continue to serve as chief executive officer of FIS with FIS headquarters remaining in Jacksonville, FL.
Through this transaction, FIS shareholders will receive a pro rata distribution of shares of Worldpay stock in a transaction that is expected to be tax-free to FIS and its shareholders for U.S. federal income tax purposes. The actual number of shares to be distributed to FIS shareholders will be determined prior to closing, as will the specific transaction structure.
FIS is planning for the separation to be completed within the next 12 months. The proposed separation is subject to customary conditions, including final approval by the FIS Board of Directors, receipt of a tax opinion and a private letter ruling from the Internal Revenue Service, the filing and effectiveness of a Form 10 registration statement with the U.S. Securities and Exchange Commission and obtaining of all required regulatory approvals. No assurance can be given that a spin-off will in fact occur on FIS’ desired timetable or at all.