Morningstar | Worldpay to Combine With FIS
FIS has announced that it intends to merge with Worldpay in a $43 billion deal. This merger follows closely on the Fiserv and First Data combination and suggests that FIS didn’t want be left behind following its peers' big move. From the perspective of Worldpay shareholders, we like the deal. At current prices, the combination of FIS shares and cash offered equates to about $112 per share, which represents a healthy 20% premium to our $93 stand-alone fair value estimate. FIS stated it expects to realize $700 million in synergies, which provides some rationale for the premium. From a strategic perspective, we remain somewhat skeptical about the value created in combining bank technology and acquiring businesses. Certainly, historically, there has always been some overlap, and therefore a loose strategic fit. Banks have always been referral partners for acquirers, and some large banks operate their own acquiring businesses. In fact, Worldpay operates a small business that provides debit card processing and other services to banks, as it helps Worldpay develop bank relationships. However, as acquiring has become more commoditized, the industry has trended toward integrating acquiring into more holistic business software offerings and developing omnichannel offerings. We don’t see bank technology providers as being positioned to material aid in this effort, given that they focus on serving banks. Further, in our view, Worldpay had adapted to this shift adequately on its own and had sufficient resources to keep up with this trend. Therefore, we don’t see the combination as materially strengthening its competitive position. We think the attraction for the bank technology companies might simply be the higher secular growth the acquiring industry offers. We don’t see any major roadblocks to the completion of this deal, and therefore expect to raise our fair value estimate for Worldpay to reflect the value offered by the FIS deal.Worldpay is a holding company. Through its subsidiaries, the company provides electronic payment processing services to merchants and financial institutions. The company operates two segments: Merchant Services, which provides merchant acquiring and payment processing services to national merchants, regional and small-to-mid sized businesses; and Financial Institution Services, which provides card issuer processing, payment network processing, fraud protection, card production, prepaid program management, automated teller machine driving and network gateway and switching services that utilize the company's proprietary Jeanie debit payment network to a set of financial institutions.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.