By David French, Anirban Sen and Milana Vinn
NEW YORK (Reuters) – Banking and payments conglomerate Fidelity National Information Services Inc is making preparations to break up, undoing a $43 billion acquisition it completed four years ago, people familiar with the matter said on Friday.
FIS plans to pursue a tax-free spin-off of its merchant business, which processes payments for companies, the sources said. The spin-off will take many months to be completed, and FIS will also entertain any acquisition offers for the unit during this period, the sources added.
Much of FIS’s merchant business consists of Worldpay, which it bought for $43 billion in 2019. Since then, FIS shares have lost more than half their value, leaving it with a market capitalization of $45 billion, as the company fights to stay competitive with old and new financial technology players promising better and cheaper services.
The Jacksonville, Florida-based company could announce the spinoff as early as next week, unveiling the results of a strategic review it embarked upon in December following pressure from hedge funds D.E. Shaw and JANA Partners, according to the sources.
The sources cautioned that no transaction is certain and asked not to be identified discussing confidential deliberations.
FIS declined to comment. The company is due to report its fourth-quarter earnings on Feb. 15.
Several conglomerates, including General Electric (NYSE:GE) Co, Johnson & Johnson (NYSE:JNJ), Kellogg (NYSE:K) Co and Toshiba (OTC:TOSYY) Corp, have broken up their sprawling businesses over the past few years amid pressure from investors to become leaner and focus on enhanced profitability in some of the core businesses.
FIS’s break-up would leave it with a core processing systems business, enabling transactions among banks and other financial institutions, as well as its capital markets division serving investment firms.
Merchant solutions makes up about 30% of the company’s revenue, while its banking solutions arm constitutes about 46%, and capital market solutions the remainder.