GTCR in talks for stake acquisition in FIS Merchant Business

Private equity firm GTCR is engaged in advanced discussions to acquire a majority stake in the merchant business of payment processing company Fidelity National Information Services (FIS), Reuters news report said.

The deal, which values the division at approximately $15 billion to $20 billion, would be the largest in GTCR’s history and would allow FIS to reverse its troubled $43 billion acquisition of Worldpay in 2019. The merchant business of FIS is primarily responsible for processing payments for various companies.

GTCR’s offer outperformed competing bids from Advent International, another prominent buyout firm. If negotiations reach a successful conclusion in the coming days, FIS intends to retain a minority stake in the merchant business.

To finance the transaction, GTCR plans to utilize a combination of equity financing and borrowing.

This large leveraged buyout could serve as a positive development amid the current challenges of expensive debt financing and economic uncertainty, which have hindered dealmaking. Data from Dealogic reveals that private equity-led buyouts in the first half of 2023 amounted to $196.7 billion, a 59 percent decrease compared to the same period in the previous year.

If the deal progresses, FIS will focus on its core processing systems business, facilitating transactions among banks and financial institutions, as well as its capital markets division serving investment firms. The decision to divest the merchant business follows FIS’s strategic review, initiated in December, under pressure from hedge funds D.E. Shaw and Jana Partners.

In February, Reuters was the first to report on FIS’s plans to shed its merchant business, which resulted in a tax-free spin-off and a $17.6 billion write-down related to the Worldpay acquisition. The unsuccessful integration of Worldpay has been attributed to under-investment and operational missteps.

The merchants business currently contributes around 30 percent of FIS’s revenue, while the banking technology arm accounts for approximately 46 percent, with the remaining portion attributed to the capital markets division.

GTCR, headquartered in Chicago, manages assets exceeding $35 billion and invests across various sectors, including financial services. In May, the firm raised its largest buyout fund to date, amassing $11.5 billion from investors.

GTCR’s previous ventures in the financial technology sector include the acquisition of mortgage software firm Optimal Blue, which was subsequently sold to Black Knight in 2020 for $1.8 billion. Additionally, GTCR acquired Global Claims Service in 2021, a company that assists property and casualty insurers with claims handling.

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