Gtcr Nears Up To $20 Bln Fis Merchant Business Deal: sources

Black Knight

04/07/2023 01:04

(Adds more background and details in paragraphs 5-16)
    By Anirban Sen, David French and Milana Vinn
       NEW YORK, July 3 (Reuters) - Private equity firm GTCR
LLC is in advanced talks to acquire a majority stake in the
merchant business of payment processing company Fidelity
National Information Services Inc  FIS.N  in a deal that values
the division at between $15 billion and $20 billion, people
familiar with the matter said on Monday.
    The deal would be the largest in GTCR's history and enable
FIS to undo its soured $43 billion acquisition of Worldpay in
2019. Worldpay comprises the bulk of the FIS merchant business,
which processes payments for companies.  
    GTCR's offer prevailed over Advent International, another
buyout firm that was also vying for the business, the sources
said. If the negotiations conclude successfully in the coming
days, FIS plans to keep a minority stake in the business, the
sources said.
    GTCR plans to finance half of the deal through equity
financing and half through borrowing, two of the sources said.
The sources requested anonymity and cautioned that deal talks
could still collapse at the last minute.
    GTCR, FIS and Advent declined to comment.
        Such a large leveraged buyout would be a bright spot as
expensive and scarcer debt financing and economic uncertainty 
    weigh on dealmaking
    . Private equity-led buyouts in the first half of 2023
totaled $196.7 billion, down 59% from the year-ago period,
Dealogic data shows.
  
        FIS shares closed 6% higher at $58, valuing the company
at $34 billion, after the Financial Times reported that buyout
groups were weighing buying a majority stake in Worldpay.
  
        Several conglomerates, including General Electric Co
 GE.N , Johnson & Johnson  JNJ.N , Kellogg Co  K.N  and Toshiba
Corp  6502.T , have broken up their sprawling businesses over
the past few years as investors pushed for leaner operations and
enhanced profitability in some of the core businesses.
  
        FIS's breakup would leave it with a core processing
systems business, enabling transactions among banks and other
financial institutions, as well as its capital markets division
serving investment firms.
  
        FIS launched a strategic review of its operations in
December following pressure from hedge funds D.E. Shaw and Jana
Partners. Reuters was first to report 
    in February
     that FIS was preparing to shed its merchants business. 
  
        FIS, based in Jacksonville, Florida, 
    said
     at the time it would pursue a tax-free spin-off of its
merchant business and disclosed a $17.6 billion write-down
related to its Worldpay acquisition. Analysts have cited
under-investment and operational missteps for its unsuccessful
integration of Worldpay.
  
        FIS, which started in 1968 and serves big financial
services corporations, has cut thousands of jobs since the
review began. It plans to cut costs by $1.25 billion in its
broader revamp.
  
        The merchants business accounts for about 30% of the
company's revenue, while FIS's banking technology arm
constitutes about 46%, and capital markets the remainder.    
  
        Chicago-based GTCR manages more than $35 billion in
assets and invests across sectors, including financial services.
In May, GTCR raised its largest buyout fund ever, 
    collecting $11.5 billion
     from investors.
  
        GTCR's previous financial technology deals include
buying mortgage software firm Optimal Blue and selling it to
Black Knight Inc  BKI.N  in 2020 for $1.8 billion. It also
bought Global Claims Service in 2021, which supports property
and casualty insurers in handling claims.
  

 (Reporting by Anirban Sen, David French and Milana Vinn in New
York; Editing by Greg Roumeliotis and Richard Chang)
 ((Anirban.Sen@thomsonreuters.com; Twitter: @asenjourno; Reuters
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