Fidelity National agrees $2.94bn deal to buy Metavante

Fidelity National agrees $2.94bn deal to buy Metavante

Fidelity National Information Services (FIS) has agreed an all stock deal worth around $2.94 billion to buy Metavante Technologies, creating the world's largest provider of integrated payment and financial processing services.

The boards of both companies have approved a definitive agreement under which Metavante shareholders will receive a fixed exchange ratio of 1.35 shares of FIS common stock for each share Metavante stock.

FIS will issue around 162 million basic shares - which closed yesterday at $18.20 - to Metavante shareholders, valuing the deal at around $2.94 billion.

In addition, equity investments by affiliates of Thomas H Lee Partners and Fidelity National Financial in FIS common stock will result in approximately 16 million additional newly issued shares.

Metavante says that its largest shareholder, an entity affiliated with Warburg Pincus that currently owns 25% of the outstanding common stock, has entered into a Support Agreement with FIS to vote in favour of the transaction.

Metavante, which was spun off by US financial services firm Marshall & Ilsley in 2007, provides banking and payments technologies to about 8000 financial services firms and businesses.

FIS says the two firms "serve complementary customer bases and have highly diversified and recurring revenue streams". In 2008, they generated pro forma combined revenue of $5.2 billion and adjusted Ebitda of $1.3 billion.

FIS says it expects to save costs of around $260 million from the deal and the transaction should add to earnings in 2010. The pro forma enterprise value of the combined company is approximately $10 billion.

"The combined scale, complementary product capabilities and market breadth of these two great companies will drive significant competitive advantages in the increasingly dynamic marketplace," says William Foley, chairman, FIS.

Foley will serve as chairman of the board with Lee Kennedy, FIS president and CEO acting as executive vice chairman with responsibility for integrating the two companies. Frank Martire, chairman and CEO, Metavante, will be named president and chief executive officer of FIS.

The deal is expected to be closed by the fourth quarter, subject to shareholder and regulatory approval.

FIS shares slipped 86 cents, or 4.73%, to $17.34 in early morning trading. Metavante shares rose $2.50, or 12.53%, to $22.46.

Comments: (3)

A Finextra member
A Finextra member 01 April, 2009, 15:59Be the first to give this comment the thumbs up 0 likes

This is a huge deal. With so much vendor and provider consolidation going on in the industry we'll see impact immediately in slowing product innovation, followed by a faster page of next-gen capabilities once roadmaps are merged. It's fortunate for Fiserv that they have nearly completed the integration of the Checkfree-Corillian-et al acquisition, because we're about to see the Clash of the Titans. (And don't think companies such as S1 won't be in the ring). All this will be quite good for the development of what Javelin envisions as the "Customer Driven Architecture", which banking consumers want but cannot get from financial providers.

Elton Cane
Elton Cane - News Corp Australia - Brisbane 01 April, 2009, 16:53Be the first to give this comment the thumbs up 0 likes

Temenos has put out a statement on this acquisition (a busy week for them), pointing out that its partnership with Metavante for the joint development and marketing of TCB in the US is binding upon both parties and assigns to successors in the case of either party being acquired.

But the same doesn't apply to the joint marketing agreement for T24 in the United States that they signed last year. That marketing agreement was initially focused on the US branches of foreign institutions, and is non-exclusive agreement and doesn't involved contractually-binding payments.

A Finextra member
A Finextra member 01 April, 2009, 23:16Be the first to give this comment the thumbs up 0 likes

This is a significant development in the competitive landscape and is likely to signal the start of more consolidation and M&A activity in the sector. Not great news for the likes of First Data and other smaller processors and central switch providers. What price independence for those bank owned national operators whose shareholders might find the chance of a windfall sale to companies with access to massive R&D funds and operational capability just too tempting?