FIS to spin off merchant business
FIS has confirmed its intention to pursue tax exemption for its Merchant Solutions business with the aim of delivering shareholder value.
FIS’s new CEO, Stephanie Ferris, embarked on a reassessment of the company’s asset portfolio when she took the helm in December with a focus on “identifying and optimizing additional revenue generation, improved margins and cost reduction opportunities”.
The payments giant has decided to cut hundreds of millions of dollars in costs by laying off 2,600 employees, including 1,000 contractors.
The review of FIS holdings comes after hedge funds D.E. Shaw and Jana Partners lobbied for ways to increase the company’s value after seeing its shares fall by more than a third in the past year.
“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.”
Jeffrey Goldstein, chairman of the board.
The new unit will leverage the previous Worldpay brand, which FIS acquired in 2019.
Merchant FIS activities account for 30% of total income, with basic banking accounting for the largest share at 46% and capital markets making up the rest.
Wordlpay recorded $4.8 billion in revenue and $2.3 billion in adjusted Ebitda in 2022. The company’s revenue comprises 43% of businesses, 27% of SMEs, and 30% of merchants. commercial in 2022.
The split is expected to last 12 months and will be led by former Worldpay CEO Charles Drucker, who will return to the helm once the transaction is complete.
