US-based financial technology group FIS has said it will spin-off Worldpay, the payments business it acquired for $43bn just four years ago, after it failed to successfully integrate the two companies.
Formally known as Fidelity National Information Services, the company acquired Worldpay in 2019 to create one of the largest providers of financial infrastructure that underlie the bank payments sector. FIS said on Monday that the tax-free split it was pursuing would unlock shareholder value, contrasting arguments made when it combined the groups that “scale matters in our rapidly changing industry”.
FIS’s decision to break up comes after activist shareholders DE Shaw and Jana Partners called on the company to review its business strategy, including considering undoing the 2019 deal.
Shares in Jacksonville, Florida-based FIS have declined by about 45 per cent since it completed its acquisition of Worldpay in July 2019 from Vantiv. The company’s stock price was down more than 14 per cent in Wall Street trading on Monday morning.
“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,” said Jeffrey Goldstein, chair of FIS’s board of directors.
“This spin-off will create two industry-leading, publicly traded companies with sharper focus and increased agility, each well-positioned to capitalise on the significant value creation opportunities ahead in their respective markets.”
FIS’s 2019 acquisition of Worldpay was a response to a wave of dealmaking in the payments sector, including Fiserv’s acquisition of rival First Data, as smaller players combined to provide more convenient offers to merchants and consumers.
The idea behind the deal was to have two businesses that would mutually benefit each other and generate more than $4bn of free cash flow annually in an industry where bigger is considered to be better. However, the payments arm has struggled since FIS’s acquisition, which has made the price it paid look steep.
FIS accelerated its management changes in December to try and quell shareholder discontent. Stephanie Ferris took over as chief executive two weeks earlier than planned and Gary Norcross, the former chief who was expected to become executive chair, left the company entirely.
Charles Drucker, the former chief of Worldpay, has been appointed as a strategic adviser to help with the spin-off and will be reinstated to his previous role when it is completed.
FIS said shareholders would receive a pro-rata distribution of Worldpay stock but did not specify the number of shares that would be distributed and said the structure of the spin-off was yet to be determined. The company expects the separation to be completed within a year.
