Fidelity National Financial (FNF) is to recapitalise its information services unit and sell a 25% stake to equity firms Thomas H Lee Partners and Texas Pacific Group for $500 million.
FNF's information services unit provides processing services, consulting and application software to the financial services and mortgage industries.
Ealier this year FNF said it planned to spin-off the business in a $500 million IPO but later abandoned the move.
In a statement, FNF says it will recapitalise the unit through a $2.8 billion credit line. On completion of the transaction, company stockholders will receive a speccial cash dividend of $10 per share. The firm expects to pay the dividend, which will total $1.8 billion, during the first quarter of 2005.
The remaining proceeds will be used to repay bank debt and for general corporate purposes, including the potential repurchase of FNF stock.
The equity investment by Thomas H Lee Partners and Texas Pacific Group values the unit at $2 billion, excluding the new debt. The 25% sale will result in a gain of approximately $375 million for FNF.
Under the deal, William Foley would remain chairman of the board and CEO of Fidelity Information Services and the equity groups would receive proportional representation on the unit's board of directors.
Foley says a number of alternatives were investigated before the embedded value of FIS was recoginsed, adding that the deal with the equity firms was "another step in unlocking the value of FIS by providing an independent, third-party valuation".