Global Payments plans to acquire merchant services company Worldpay for $24.25 billion, including $1.55 billion in tax assets, from its two owners, Fidelity National Information Services and private equity firm GTCR.

In a swap of assets, banking technology services company FIS also said Thursday that it expects to buy Global Payments’ issuer business for $13.5 billion, including $12 billion plus $1.5 billion in tax assets.

The multi-pronged deal makes good on previously announced intentions by the two payments players to expand their core businesses as they move out of certain related ancillary areas.

Global Payments has been in a “transition” period in which it was exploring what parts of its business to sell. The Atlanta company was encouraged by analysts to consider selling the issuer business in order to concentrate on its payments processing.

For Jacksonville, Florida-based FIS, buying the issuer services business was a natural way to expand its main banking services segment.

“The acquisition of Issuer Solutions is a strategic and accretive transaction that will expand FIS’ payment product suite and deepen our relationships with financial institutions and corporate clients,” said FIS CEO Stephanie Ferris said in a press release regarding the transaction.

Chicago-based GTCR is cashing out of its majority ownership holding in Worldpay just over a year after completing its acquisition of the stake from FIS, which retained a minority stake.

As part of the agreement, FIS will sell its stake in Worldpay to Global Payments for $6.6 billion in pre-tax value, the FIS release said.

Cross-selling may be a benefit

In its acquisition of Global Payments’ issuer business, FIS is blending in an issuer operation that processes some 40 billion transactions annually in 75 countries and has ties to about 170 financial institutions and companies.

As for Global Payments, its release highlighted a new “extensive global reach and scale” by way of the merger, noting the combined company will have six million merchant customers, and process about 94 billion transactions annually for $3.7 trillion in payments volume in 175 countries. 

FIS expects to benefit from being able to cross-sell more services to banks, particularly with respect to card payments acceptance, according to an FIS presentation Thursday.

“While revenue synergies are expected to be small initially, we believe the cross-sale opportunities are substantial; FIS’s issuer-processing (Payments One) platform is largely focused on debit, while (Global Payments) has a large presence in credit and adds value-added services,” analysts at the financial firm William Blair said in a note to their clients on Thursday. “The credit capabilities should help drive incremental growth in loyalty products (i.e., Premium Payback) and further cross-selling opportunities with its customers across the banking and capital markets segments.”

The William Blair analysts also noted the likelihood of FIS benefitting from the acquisition in the area of business-to-business payments.

Global Payments will pay for the acquisition with proceeds from the sale of the issuer business, cash and new debt, the company said.

“The acquisition of Worldpay and divestiture of Issuer Solutions further sharpen our strategic focus and simplify Global Payments as a pure play merchant solutions business with significantly expanded capabilities, extensive scale, greater market access and an enhanced financial profile,” Global Payments CEO Cameron Bready said in the release.

Still, at least one analyst who follows the payments industry said he thought that FIS got the better end of the deal.

“We believe that the transaction is more compelling for FIS,” than for Global Payments, RBC Capital Markets analyst Daniel Perlin said in a brief note to clients Thursday regarding the transaction. That’s because FIS “essentially replacing” a non-cash payment from its Worldpay stake with “recurring revenue and cash flows,” he explained. 

Risks emerge with deals

Meanwhile, Global Payments is “gaining significant scale in payments, but the deal moves it “down a path of continued complexity in its narrative,” Perlin said.

Global Payments aims to tap Worldpay’s “broad global distribution channel,” with a sales force of about 4,000 across 40 countries and more e-commerce strength with a new presence in additional regions, including France, Scandinavia and the Middle East, according to analysts at the financial firm TD Cowen.

Global Payments will also have new cross-selling possibilities, specifically pitching some of Worldpay’s merchant services to its six million mid-market clients, the TD Cowen analyst pointed out in a Thursday note to clients.

Still, Global Payments already faces “integration risks” related to the transition its executives mapped out last year, the TD Cowen analysts said. Those changes included divestitures and a streamlining of the business that was expected to slow revenue growth this year. This latest deal will “add to those concerns,” they said, also noting the potential for merchant client attrition amid the changes.

The debt rating firm Fitch Ratings also expressed some worries about FIS' ability to amalgamate the businesses, and downgraded its outlook for that company to "stable" from "positive." "The Worldpay divestiture to GPN removes a layer of complexity, but also creates some execution risk in the near-term as management focuses on these large-scale deals," Fitch said in its Thursday report.

The companies said in their releases that they expect to close the transactions in the first half of next year.