Fidelity National Information Services Inc. (FIS) has agreed to acquire Worldpay Inc. (WPG) for approximately $34 billion in cash and stock, the biggest ever deal in the white-hot payment processing sector, Bloomberg reports.
Florida-based FIS will also take on Worldpay’s net debt of $7.7 billion, bringing the enterprise value of the deal to around $43 billion. FIS shareholders will own about 53% of the combined company, while Ohio-based Worldpay’s investors will get the remainder.
Worldpay, spun off from Royal Bank of Scotland in the aftermath of the 2008 financial crisis, became the U.K.’s largest payments firm before it was taken over by Vantiv in a $10.4 billion deal that closed in January 2018, the Financial Times reports. The two companies agreed to keep the group headquarters in Cincinnati and run international operations from London while maintaining a secondary stock market listing in the UK.
The FIS deal is part of wider consolidation within the payment processing sector brought on by the fact that traditional merchant payment services focused for too long on their business with brick-and-mortar retailers, neglecting the growing e-commerce sector. That left a niche for startups like Stripe Inc. and Adyen BV, which have garnered high valuations as a consequence.
Now that those startups are maturing, the financial data processing industry is ripe for mergers and acquisitions. Established companies are buying fintech rivals or startups that can help them expand their offerings or their territories. The global payment processing market is currently valued at $1.4 trillion and is expected to grow by another $1 trillion by 2027, according to BCG.
In January, Fiserv (FISV) agreed to purchase rival First Data (FDC) in a $22 billion deal that’s set to close in the third quarter of 2019. PayPal (PYPL) bought Sweden’s small business payment platform iZettle for $2.2 billion in 2018, in a move to make the company more competitive with Square (SQ).
IPOs have been doing well in the payment processing arena as well, Bloomberg reports. Italy’s Nexi SpA is planning for a flotation in Milan by the end of April, aiming to raise as much as €2.7 billion ($3.1 billion). Adyen NV, based in the Netherlands, was one of the best-performing IPOs globally last year and was valued at $19 billion at the end of 2018. Stripe, valued at $20 billion after a funding round last September, has no plans for an IPO.
German payment processing giant Wirecard was valued at $23 billion in late 2018, but has been plagued by accusations of financial malfeasance in its Singapore office. The company denied the reports in the Financial Times and said it was an attack by short sellers. Wirecard’s stock dropped by almost 50% in the days following the report.