Dive Brief:

• The private equity firm GTCR may acquire a majority ownership stake in Worldpay, the merchant unit being spun off by Fidelity National Information Services (FIS), according to a report from media outlet Reuters, which cited unidentified sources familiar with the matter.
• GTCR bested another buyout firm, Advent International, with a bid that values Worldpay at between $15 billion and $20 billion, the news organization reported Monday, noting that parent FIS would retain a minority stake in the unit. “We do not comment on market rumors or speculation,” an FIS spokesperson said. A spokesperson for GTCR didn’t immediately respond to a request for comment.
• GTCR and Advent were said to be vying for the stake, according to an earlier report, on Friday, from the Financial Times. Another report, from the media outlet Bloomberg on Monday, said that the discussions between FIS and GTCR could still end without a deal, according to an unnamed source.

Dive Insight:

Jacksonville, Florida-based FIS said in February that it would spin off Worldpay, which processes payments for United Airlines, streaming company Netflix and retailer Zara, among others, according to Worldpay’s website. FIS also noted at that time that it would take a $17.6 billion non-cash goodwill charge to acknowledge the decreased value of the business, which FIS acquired just a few years ago for $43 billion, including debt, in 2019.

A company seeking to spin off a unit is often akin to hanging a “for sale” sign on the business. While merger and acquisition activity hasn’t revved up in the payments industry as much as some may have expected this year, at least so far, it has increased in recent weeks, perhaps as valuations keep climbing despite recessionary clouds.

“If this were to materialize (beyond news reports), we would expect this to be an upside surprise for investors versus ongoing uncertainty over demand for the spin-co and questions over the earnings power of Worldpay post-spin,” Wolfe Research analysts said in a note to their clients on Monday.

In a May quarterly filing with the Securities and Exchange Commission earlier this year, FIS said it would keep up to a 19.9% ownership stake in Worldpay as part of the spin-off transaction.

Charles Drucker, the former CEO of Worldpay, was expected to reclaim his title as CEO of the business after the spin-off was to be completed next year. 

FIS contended in announcing the spin-off that Worldpay would then be more equipped to pursue acquisitions. Worldpay hasn’t had the right capital structure for acquisitions, FIS CEO Stephanie Ferris has said. “With a different capital allocation strategy, Worldpay will be able to pursue more aggressive investment opportunities, including M&A,” the company said in a spin-off press release.

Chicago-based GTCR would seem to have the deep pockets to fund follow-on Worldpay acquisitions. The investment firm closed on an $11.5 billion fund in May, contributing to its $35 billion under management.

FIS has sought to break with Worldpay and squeeze savings out of its remaining businesses catering to the technology needs of banks and capital markets firms after two activist shareholders, D. E. Shaw and JANA Partners, made investments in the company last year. FIS aims to shave $1.25 billion in costs under a program begun last year, including some $500 million by the end of this year.

The company has cut 2,600 employees as part of the cost-cutting, according to the news outlet Bloomberg.