Worldpay deal boosts slumping FIS

Fidelity National Information Services Inc. sees stock rebound after agreeing to sell majority stake in the merchant payments subsidiary.


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Jacksonville-based FIS said July 6 that Chicago-based private equity firm GTCR will pay $11.7 billion to acquire 55% of Worldpay.
Jacksonville-based FIS said July 6 that Chicago-based private equity firm GTCR will pay $11.7 billion to acquire 55% of Worldpay.
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Before word leaked out over the July 4 weekend that the company was nearing a sale of its Worldpay unit, Fidelity National Information Services Inc. was the worst performing stock this year among Jacksonville-based companies trading above $10.

The stock fell 19% in the first six months of 2023 and was down 48% from its 52-week high of $105.16 in August 2022.

FIS made a little bit of a comeback in the first week of July as it announced a deal to sell a majority stake in its Worldpay merchant payments subsidiary. 

The 8% rise was one of the best gains among S&P 500 companies in an overall down week for the market but at $59.27 at the end of the week, it still had a long way to go.

FIS agreed July 6 to sell a 55% interest in Worldpay to Chicago-based private equity firm GTCR for $11.7 billion. 

Worldpay has produced disappointing results since it was acquired in a $43 billion deal in 2019, and FIS announced a plan in February to spin off the business as a separate public company.

“Since February’s announcement, FIS received several expressions of interest to buy its Merchant Solutions business from parties who see significant growth potential for Worldpay and want to invest in its future success,” FIS said in an FAQ for investors after announcing the deal with GTCR.

“For FIS, this new separation provides cash proceeds that will enable the Company to strengthen its balance sheet by accelerating the paying down of debt, while also providing capital for the repurchase of shares and general corporate purposes,” it said.

The deal values Worldpay at $18.5 billion, far below the value when FIS acquired the business, but analysts generally agreed this was the best outcome at this point.

“We like that this deal allows FIS to maintain a stake in Worldpay. We also believe that Worldpay may be better off as a private company, given that we think the business needs significant investment to restore growth,” Morningstar analyst Brett Horn said in a research report.

“Adding Worldpay ownership and overall capital structure clarity now allows more focus on what we expect to be the primary incremental catalyst for FIS over the next 12 months: improving growth in the Banking Services segment,” Morgan Stanley analyst James Faucette said in a research note.

Faucette maintained an “overweight” rating on the stock.

Baird analyst David Koning said in a note that the deal should result in 10% to 15% of FIS’ net income coming from its minority stake in Worldpay, as FIS refocuses on its core banking technology business and also a capital markets technology unit.

“We like the stock,” said Koning, who maintains an “outperform” rating on FIS.

“The current implied valuation for Banking/Capital Markets of 8.5-9 times 2024 estimated earnings seems low for the highly recurring business,” he said.

Truist Securities analyst Andrew Jeffrey is more reserved with a “hold” rating.

“Our relatively cautious view on FIS reflects an expectation that Remain Co, comprised of Modern Banking and Capital Markets segments, is fairly valued,” Jeffrey said in a research note as rumors of the pending sale leaked but before the deal was announced.

“We contend Modern Banking occupies a relatively disadvantageous position, considering a competitive market and potential Bank IT spending pressure created by industry disruption,” Jeffrey said.

Dream Finders’ stock leads the pack

Dream Finders Homes Inc.’s stock was the best performer among Northeast Florida-based companies in the first half of 2023, tripling in price from its December 2022 low of $8.17 to $24.59 at the close June 30.

The Jacksonville-based home builder has taken stockholders on a roller-coaster ride since its initial public offering at $13 a share in January 2021.

The stock was an immediate success and jumped as high as $36.60 in June 2021.

However, as rising mortgage rates and supply chain issues dampened the housing market, the stock fell off and Dream Finders fell short of its 2022 goal of delivering 7,000 new homes.

In 2023, the homebuilding sector is heating up again as limited inventory of existing homes is creating demand for newly constructed homes.

The S&P Homebuilders Select Industry Index jumped 33% in the first half of 2023, twice the gain of the S&P 500 index.

Dream Finders reported first-quarter revenue rose 16% and home closings increased 11%.

The company’s profile is also increasing with its inclusion in the Fortune 1000 list of largest U.S. companies. Dream Finders ranked 843rd, based on its 2022 revenue of $3.342 billion.

Among Jacksonville-based companies that were trading above $2 at the beginning of 2023, only two others beat the S&P 500 in the first six months of the year.

The winners were trucking companies Patriot Transportation Holding Inc., which rose 20%, and Landstar System Inc., up 18%.

Black Knight FTC hearing postponed to September

An evidentiary hearing before a Federal Trade Commission administrative law judge on Intercontinental Exchange Inc.’s proposed acquisition of Jacksonville-based Black Knight Inc., scheduled to begin July 12, was postponed to Sept. 25.

The FTC filed an administrative complaint to block the $11.7 billion deal in March, saying the merger would give ICE too much control over the U.S. mortgage technology market.

The agency followed that up a month later by filing a complaint in federal court in San Francisco seeking an injunction to block completion of the merger before the administrative case could be heard.

In an order issued June 27, the FTC stayed the administrative hearing until the federal court case could be decided.

An evidentiary hearing on the FTC’s request for an injunction is set to begin July 24 in U.S. District Court for the Northern District of California.

ICE is best known as operator of the New York Stock Exchange but it does have a large mortgage technology unit. Black Knight’s main business is mortgage technology.

ICE and Black Knight first announced the merger agreement in May 2022 and were hoping to complete the deal in the first half of this year before the FTC sought to block it.

Seaside Bank becoming United Community Bank

Three years after it was acquired by United Community Banks Inc., the branches of Seaside Bank and Trust are taking on the United Community name.

Seaside has one Jacksonville area office in Ponte Vedra Beach and 15 other branches, mainly in South and Central Florida.

Its parent company, Orlando-based Three Shores Bancorporation Inc., was acquired by Greenville, South Carolina-based United Community for $180 million in July 2020.

The company decided to continue operating the Florida branches under the Seaside name but now intends to change the name of those offices to United Community Bank on July 31.

Other than the name change, bank customers will see no changes to their accounts.

United Community has $25.9 billion in assets and 207 offices in Florida, Georgia, Alabama, North Carolina, South Carolina and Tennessee.

Memphis company invests in ShowOps

An investment arm of Pittco Management LLC said June 28 it made an equity investment in ShowOps Inc., a Jacksonville-based company that provides operational and administrative tools for the live event industry.

Memphis-based Pittco is a financial services company started more than 30 years ago by Pitt Hyde, founder of the AutoZone retail chain.

Terms of the investment were not announced. 

 

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