Banking and payments conglomerate Fidelity National Information Services Inc (NYSE: FIS) is reportedly planning to break up its operations, which will involve undoing a $43 billion acquisition it finalized a few years back. This, according to sources familiar with the matter (and cited by Reuters).
FIS intends to pursue a tax-free spin-off of its merchant unit, which handles payments for firms, the sources revealed. The spin-off should take several months to be finalized, and FIS may go after any potential acquisition offers for the business during this period, the sources noted.
A major part of FIS’s merchant business includes Worldpay, which it acquired for $43 billion back in 2019. Since that time, however, FIS shares have shed over half their value, leaving the firm with a market cap of around $45 billion, as the business struggles to remain competitive with traditional and emerging Fintech platforms promising more accessible services.
The Florida-headquartered firm might reveal the spinoff in the coming week, unveiling the results of a review it had initiated in December. This was a move that came after pressure from hedge funds D.E. Shaw and JANA Partners, the sources told Reuters.
The sources also warned that no transaction is currently confirmed or certain.
FIS is now expected to report its 4th quarter earnings on February 15, 2023.
A number of other established conglomerates such as General Electric, Johnson & Johnson, Toshiba Corp have moved towards breaking up their large businesses during the last few years. These moves have been undertaken due to increasing pressure from investors to become more agile and focus on profitability in the core business areas.
As reported by Reuters, FIS’s expected breakup might leave it with a core processing systems unit, supporting transactions among banking institutions and various other financial services providers, and its capital markets unit serving investment companies.
Merchant solutions reportedly makes up around 30% of the Fintech firm’s revenue, meanwhile, its banking services division constitutes approximately 46%, and capital market solutions the rest.