The separation will enable FIS to target a strong investment grade credit rating, while allowing Worldpay to invest more aggressively for growth.
FIS has 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 payments giant announced.
Charles Drucker, former FIS chief executive, was named as a strategic advisor to aid with the separation and ongoing business review and to become CEO of the Merchant Solutions business after the spin-off.
“Board concluded that the spin-off of Worldpay will unlock shareholder value”
The spin-off, which is expected to be completed within the next 12 months, will be named Worldpay because it is believed to offer 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
Jeffrey A. Goldstein, Chairman of the Board at FIS, said: “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. 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.”
FIS to target investment grade credit rating, Worldpay to invest for growth
Stephanie Ferris, CEO and President at FIS, said: “I’m confident that today’s announcement advances our goal of optimizing for performance and returns while improving the satisfaction of our clients and colleagues. We will create two more focused, agile companies that can pursue tailored strategies that are aligned with specific long-term growth opportunities. Both companies will be market leaders in their own right, and we believe that, as separate companies with a commercial relationship, we will deliver a superior outcome. 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.”
Worldpay was acquired by FIS in 2019 and the brand remains highly trusted among clients and partners. It is the largest global merchant acquirer by transactions with $2 trillion in payments volume in 2022.
A leader in cross-border eCommerce, with $4.8 billion in revenue and $2.3 billion of Adjusted EBITDA in 2022, Worldpay’s revenue was comprised of 43% enterprise, 27% SMB, and 30% eCommerce in 2022.
As a spin-off, Worldpay will increase its focus on expanding in eCommerce, strengthen its enterprise offerings, and transform SMB. 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.
FIS, following the proposed spin-off, will focus on fintech solutions for financial institutions, capital markets firms, clients, and corporates globally.
FIS’ Banking and Capital Markets businesses generated $9.5 billion of revenue and $4.2 billion of Adjusted EBITDA in 2022, excluding Corporate and Other.
The spin-off will see FIS shareholders 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.