01 Apr Metavante purchased by Fidelity National for $2.94B
MILWAUKEE: Fidelity National Information Services Inc. will acquire Metavante Technologies Inc. under an agreement announced today. Both company’s boards approved an agreement for the stock deal that will combine the financial service firms to create the world’s largest provider of comprehensive integrated payment and financial core processing services.
Under the agreement, Metavante shareholders will receive a fixed exchange ratio of 1.35 shares of FIS common stock for each share of Metavante common stock they own. The value of the combined company is approximately $10 billion.
“Both companies are really combining from a position of strength,” Lee A. Kennedy, FIS president and chief executive officer, explained in a conference call today. “When we look in the future this upps the bar for the organization.”
Because the companies are similar in terms of its product lines, Kennedy said to expect tangible value and “big cost synergies” from what will become the largest company of its kind on the globe.
The combination creates an opportunity for enhanced growth prospects. FIS, headquartered in Florida, is a provider of core and transaction processing services, card issuer solutions and outsourcing services to more than 14,000 financial institutions worldwide. Milwaukee-based Metavante offers banking and payments technologies to approximately 8,000 financial services firms and businesses. Together, the firm will provide one of the most comprehensive ranges of integrated products and services across more markets and more geography.
“The whole ball game with financial institutions has changed over last few years. What we’re seeing is a growing trend for financial institutions to get back to basics. This is centered around their ability to manage risks properly,” said Kennedy, adding that more banks are outsourcing services to deliver products to customers with better cost efficiencies.
FIS and Metavante serve complementary customer bases and have highly diversified and recurring revenue streams. In 2008, the companies generated combined revenue of $5.2 billion, adjusted EBITDA of $1.3 billion, and free cash flow of more than $500 million. With the combination, FIS anticipates achieving cost synergies of approximately $260 million.
“By bringing these two companies together, we expect to accelerate revenue growth, drive higher profitability, and create greater financial flexibility for growth investments and acquisitions,” stated Frank R. Martire, Metavante’s current chairman and chief executive officer. “In addition, the size, scope and geographic reach of the combined company will offer even greater opportunities to our employees, world-wide.”
The leadership team will be comprised of executives from both companies with broad industry experience and strong management depth. William P. Foley, II, chairman of FIS, will serve as chairman of the board. Kennedy will serve as executive vice chairman of the board with responsibility for integrating the two companies, and Martire will be named president and chief executive officer of FIS. Reporting to Martire will be Gary A. Norcross as chief operating officer (current COO of FIS) and Michael D. Hayford as chief financial officer (current president and COO of Metavante). George P. Scanlon (current chief financial officer of FIS) will serve as executive vice president of finance. Following the completion of the transaction, the board of directors will consist of six FIS board members and three Metavante directors. The FIS headquarters will remain in Jacksonville, Florida.
The transaction will be structured as a tax-free reorganization whereby Metavante will be merged with and into a newly formed subsidiary of FIS. Based on the 1.35 fixed exchange ratios, FIS would issue approximately 162 million basic shares to Metavante shareholders. In addition, a simultaneous equity investment by affiliates of Thomas H. Lee Partners, L.P. and Fidelity National Financial Inc. in FIS common stock will result in approximately 16 million additional newly issued shares. At closing, the combined company would have approximately 374 million fully diluted shares outstanding. The requisite Metavante lenders have agreed to waive their change of control provisions and permit the merger to proceed. After giving effect to the transaction, the combined company is projected to have approximately $3.8 billion of debt outstanding at closing, including $1.45 billion of debt to be incurred and assumed in connection with the acquisition and will have improved financial leverage and credit statistics.
The transaction is subject to approval by FIS and Metavante shareholders, regulatory approvals and the satisfaction of customary closing conditions. Metavante said that its largest shareholder, an entity affiliated with Warburg Pincus that currently owns 25 percent of the outstanding common stock, has entered into a support agreement with FIS pursuant to which it has agreed, subject to the terms and conditions of the agreement, to vote in favor of the transaction. Pincus will be the largest single shareholder of the new company with approximately 11 percent ownership and will have board representation. FIS and Metavante expect to complete the transaction in the third quarter of 2009.