FIS has confirmed that it will try to spin off its Merchant Solutions business in a way that won’t cost it any taxes. This isbecause to increase shareholder value.
After becoming FIS’s CEO in December, Stephanie Ferris began a portfolio assessment. Her goal was to identify and optimize incremental revenue generation, margin improvement, and cost reduction opportunities.
The payment giant fired 2600 workers and 1000 contractors to save hundreds of millions of dollars.
After FIS’s shares dropped by more than a third over the past year, hedge funds D.E. Shaw and Jana Partners pushed for review of the company’s business assets to find ways to boost the company’s value.
“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,” says Jeffrey Goldstein, chairman of the board. “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.”
FIS bought the Worldpay brand in 2019, so the new unit will use that to its advantage.
30% of FIS’s total revenue comes from merchant operations. Core banking makes up 46% of the rest, and capital markets make up the rest.
In 2022, Wordlpay had sales of $4.8 billion and Adjusted Ebitda of $2.3 billion. In 2022, 43% of the business’s income came from enterprise, 27% from SMB, and 30% from eCommerce.
The spin-off expected to take a year to finish. And Charles Drucker, who used to be the CEO of Worldpay, will return to the helm once deal is done.
