FIS Accelerates Worldpay spinout; PE Firm GTCR Acquires Majority Stake at $18.5 billion valuation
TFL #24: FIS to keep a non-controlling 45% ownership in the standalone JV
Good morning fintech Illuminati 🧐.
Welcome back to The Fintech Ledger! 🔥
In today’s newsletter, I take a look at the FIS and Worldpay spinoff - ending a short, lackluster pairing. Now that venture funding is at a relative standstill, especially for later stage startups, those with dry powder are ripe for doing M&A deals, despite the high interest rate environment.
Let’s jump in.
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The short-lived marriage between FIS and Worldpay is officially coming to an end. Earlier this week, FIS announced they were “accelerating” their previously announced separation plan and had reached an agreement to sell a majority stake in its Worldpay Merchant Solutions business to private equity firm GTCR. The deal values Worldpay at $18.5 billion. That’s less than half the $43 billion FIS paid for it when it acquired the acquirer processor in 2019.
Earlier this year, I compared Worldpay to Elizabeth Taylor in Worldpay FIS divorce: deja vu all over again, where I wrote about the decision to retreat from the four year old acquisition, a clear sign of failure and just the latest in a long line of spinoffs for the global payment giant. While the article was well received (it is one of my top read all time posts) I definitely heard from the peanut gallery that my “Liz” reference was….er….dated.
Elizabeth Taylor filming Cleopatra, 1962
Ok fine.
To put it in modern terms, Worldpay are more akin to say Kim Kardashian, with a history of short lived public tie-ups that ultimately go their own way. Despite this, they both somehow manage to keep plugging along (probably due to their innate ability to print cash!).
So what does this mean for the newly single (er…newly attached) Worldpay?
It’s complicated.
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Worldpay & FIS: A Strategic Vision….Blurred
The vision behind the deal was simple: use the “synergies” to create a global payment’s giant and cross sell their services. It never fully materialized. Worldpay rode the wave of increasing online payments for the last decade or so, operating a card payment business in the role of Acquirer, a key part of the payment networks “four-party model.” In this model, Worldpay sells payment processing and supporting services - routing transactions to the applicable network for authorization, clearing, and ultimately settlement to the merchant’s bank account.
The problem with the deal? Worldpay has seen diminishing profit margins and underwhelming growth since the merger, due in part to newer competitors like Adyen and Stripe, in addition to ISVs like Block (Square), Shopify, Toast, Clover etc. This shrinking growth had a negative effect on FISs share price, which has more than halved since the 2019 acquisition, bringing its market cap to around $35 billion (that’s less than the original Worldpay valuation of $43 billion at the time of the merger).
FIS Stock Price since the Worldpay Acquisition was announced in 2019
FIS CEO Stephanie Ferris was pretty clear this was a move to save what value they could. While it was definitely a ”hit”, with FIS retaining a 45% minority stake, the final chapter has not yet been written here.
This transaction allows FIS to partially monetize our merchant solutions business at an attractive valuation and provides certainty for all stakeholders.
FIS CEO Stephanie Ferris said in a statement
Partially monetize?
Talk about turning lemons into lemonade. Make no mistake. This is a turnaround effort. And Worldpay is a tanker.
Largest buyout financing in over a year
The deal marks the largest buyout financing since Wall Street agreed to lend Elon and co. $13 billion to fund the takeover of Twitter last year. It also signals a return to M&A and a return to risk, high interest rates be damned.
The financing includes circa $9.4 billion of debt, led JPMorgan Chase and Goldman Sachs, including $8.4 billion of leveraged loans and high yield bonds, denominated in dollars and euros.
FIS will receive approximately $11.7 billion in net proceeds at close (expected Q1 2024), subject to regulatory approvals and other customary closing conditions.
Source
Following the sale, Worldpay will operate as a standalone private company and attempt to reestablish its brand with a new leadership team in place. Charles Drucker and Stephanie Ferris will both join the Board of Directors, with Drucker taking over the CEO spot.
It’s a new era for Worldpay. One that they are all to accustomed to.
Disclosure: I worked at Worldpay over a decade (and several acquisitons) ago.
Twitter is not all memes and shitposts (but yeah, there’s also that!). This week, Zuck (aka Mark Zuckerberg) announced the launch of a Twitter clone Threads, which had reached 1O million signups in just seven hours (and 70 million within 48 hours)!
This of course did not sit with his purported potential cage match nemesis Elon Musk, who sent a cease-and-desist letter, threatening legal action against his tech rival for allegedly hiring former Twitter employees to create a "copycat" of Twitter.
This is getting good.
Check out my FintechTweeps for a curated list of Fintwit’s best & follow me @fintech_ryan for more (Twitter).
Crypto trading volume on centralized exchanges experienced a significant drop in the second quarter, reaching its lowest point since the fourth quarter of 2019, according to research from CCData. In June, however, trading volume increased 16.4% to $575 billion, purportedly due to the optimism following the filing of spot Bitcoin ETFs by the world's largest asset managers, BlackRock and Fidelity.
The For Fintechs Sake podcast has rebranded as the Fintech Family Hour with Zach Anderson Pettet!
In this first edition since the rebrand, Zach interviews Vinod Khosla - VC and Founder of Khosla Ventures (and Sun Microsystems before that). They talk about his work with Sam Altman and solving proof of personhood through their Worldcoin cryptocurrency, abuse he is seeing in Crypto, and how to innovate in hard times.
It’s a great episode. Give it a listen!
Moneyhub and MX Partner to Provide Open Banking Solutions Around the World.
The Checking Account War Is Over (And The Fintechs Have Won).
Quontic Bank, which had been operating under an OCC consent order since 2018, has entered into a formal agreement with the Federal Reserve.
Maza, an a16z funded Startup for Undocumented Immigrants, accused of using deceptive claims.
Thrive Capital doubles down on Clair, a fintech helping frontline workers get paid instantly.
China ends Ant Group's regulatory revamp with nearly $1 billion fine.
Compliance chief at Lian Lian, a Chinese fintech company stole girlfriend’s insider info to trade VMware, tech stocks.
Regulated Liabilities Network: Financial services is one step closer to a use case for blockchain
Polygon unveils plan to build network of ZK-based Layer 2 chains.
Tether freezes $2.5 million of USDT transferred from Multichain.
Binance marketshare at lowest point since beginning of the year.
Coinbase Knew It May Have Been Violating the Law Prior to the SEC's Lawsuit, Regulator Claims.
BlackRock CEO’s Turnabout on Bitcoin Elicits Cheers, Skepticism of Crypto Cred.
Report: Tom Brady lost $30M in collapse of crypto giant FTX.
Crypto.com sent user $50K by mistake — now wants $76K in return.
Bain Capital Ventures Partner Matt Harris recently presented on the stated of Fintech at BCVs 2023 Fintech Summit in New York. Some key takeaways:
2021 was an anomaly for venture capital and we’re not going to see that level of VC investment for years.
There is a “fog of war” involving the uncertainty of the economy and the rise of generative AI.
The death of regional and mid-sized banks in the US could lead to a credit crunch.
The full transcript can be found at: Fintech Is in a ‘Fog of War’ (Matt Harris: Bain Capital Ventures).
2. This one’s a bit of a throwback, but timely with this week’s Worldpay news. In Batch Processing, Jareau Wade discusses Worldpay’s “Trench Coat” theory of M&A.
It’s a classic.
Alas all good things must come to an end. If you enjoyed this content, please hit “like” button. Ideas for an area you’d like to learn more on, leave a comment!
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Until next time, fare thee well friends.
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