Tuesday, March 26, 2019
Payments industry analysts say the blockbuster $35 billion acquisition of Worldpay by FIS is a reflection of a wider consolidation trend in the payments industry fueled by consolidation in the e-commerce space.
FIS, the Jacksonville, Florida-based financial technology firm, announced an agreement to buy Worldpay Inc. for $35 billion in stock and cash, creating one of the world’s biggest payments firms. The agreement follows the blockbuster merger deal in January when Fiserv agreed to buy First Data for $22 billion.
Thad Peterson, senior analyst at Aite Group, said the mergers reflect two growing trends in the payments industry, including the increased globalization of the business and technological changes in the payments and banking space.
“Commerce is blurring borders, and it’s not unusual for an individual in Indonesia to purchase something on AliExpress in China, and payments need to follow the transaction,” he told Mobile Payments Today via email. “Payments used to be geographically driven with unique payment alternatives and processes in many markets. With globalization of commerce, payments need to support transactions wherever they occur.”
The combined company will have $12.3 billion in pro forma annual revenue in 2019 and $4.9 billion in adjusted EBITDA. Officials said the deal will result in $500 million in revenue synergies, $400 million in run-rate expense synergies and $4.5 billion in free cash flow in three years.
Jon Edirmanasinghe, partner at Cavendish Corporate Finance, said his firm continues to see interest from software firms looking to make acquisitions in the payments space.
“FIS Global’s acquisition of Worldpay clearly aims to deliver significant cross-sell opportunities between software solutions and payment solutions, and a broader service opportunity for the combined solution,” he said via email.
The combined firm will continue to operate under the FIS brand and will remain in Jacksonville. Norcross will remain as chairman, CEO and president of FIS, while Charles Drucker, the current executive chairman and CEO of Worldpay, will become executive vice chairman of the board.
The agreement follows the January blockbuster merger deal in which Fiserv agreed to buy First Data for $22 billion.
The FIS deal is expected to close by the second half of 2019.