Thursday , November 26, 2020

FIS’s Metavante Acquisition To Create a Processing Powerhouse

Fidelity National Information Services Inc. (FIS) will buy Metavante Technologies Inc. in a $2.94 billion all-stock deal announced on Wednesday. The acquisition will create a bank- and payments-processing giant with $5 billion in combined revenue and a vast array of products in everything from core banking services to credit, debit, and prepaid card processing, electronic bill payment, check imaging, and emerging technologies such as mobile payments.

The risk is flubbing the complex integration task after the deal’s expected third-quarter close, a risk Jacksonville, Fla.-based FIS president and chief executive Lee A. Kennedy said both companies are prepared to take because of their successful integration of previously acquired companies. “It’s a matter of getting the organization committed and focused on this,” Kennedy said in response to an analyst’s question at a conference call Wednesday morning.

The companies were vague about how the deal came together, saying more details would come out when they issue a proxy statement in a couple of weeks. But the comments from top executives of both companies at the conference call indicated they had been talking for several months, probably at the initiative of FIS.

“Metavante was clearly our number-one target,” Kennedy said. Indeed, in both core processing and payments, “Metavante was the brand they would go after,” says Nancy Atkinson, a senior analyst at Boston-based researcher Aite Group LLC. “Metavante is a well-known name, and well-respected.” FIS has a history of acquisitions, including such prominent names in payment card and electronic funds transfer processing as eFunds Corp. in 2007 and Certegy Inc. in 2006.

Metavante, meanwhile, has purchased a number of technology companies, including several even before bank holding company Marshall & Ilsley Corp. spun it off in late 2007. That same year, it formed Monitise Americas LLC, a mobile-banking firm, as a joint venture with Britain’s Monitise PLC.

Driving the deal were the possibilities of one processor offering a long list of complementary products attractive to financial institutions as they emerge from the recession, and the ability to take out an estimated $260 million in annual costs through elimination of redundant products and facilities, combinations of processing platforms in some cases, and a whittling of suppliers.

“A major portion of the benefit, before the revenue synergies kick in, is all driven by expense take-out,” Kennedy. said. Many observers also see the deal placing the combined companies in a stronger position to compete with Milwaukee-based Fiserv Inc., the biggest of the core procesors and another company that has expanded through acquisitions in recent months. “It’s a great deal,” says Steve Mott, a payments researcher and consultant based in Stamford, Conn. “Now you have somebody who has the bulk to compete against Fiserv.”

Eric Grover, principal at Intrepid Ventures Inc., a Menlo Park, Calif.-based payments- advisory firm and a former Visa Inc. executive, agrees the deal “creates a core banking and electronic payments behemoth,” he says in an e-mail. “If Lee Kennedy and the new management team can mesh it all into a coherent offer and cross-sell into the enormous combined U.S. client base, and get more aggressive overseas, this could be a winner.”

FIS, with revenues of $3.4 billion last year, currently has 1,400 core financial-institution processing customers and processes more than 164 million credit, debit, and prepaid cards annually. Metavante had $1.7 billion in revenues in 2008. It has 850 core processing customers, processes more than 80 million debit and prepaid cards, and owns the NYCE EFT network. It also processes 259 million bill payments annually and has about 6,000 financial institutions connected to its Endpoint check-clearing and image-exchange network.

About 20% of the combined company’s revenues will come from international operations, most from the FIS side. The combined company will be headquartered in Jacksonville but headed by Metavante’s chairman and chief executive, Frank R. Martire, who will have the titles of president and chief executive. Kennedy will become executive chairman and spend most of his time overseeing the cost-cutting efforts. FIS’s current board chairman, William Foley, will lead the merged company’s board, which will have six directors from FIS and three from Metavante.

Metavante shareholders will get 1.35 shares of FIS stock under the deal the companies say values Metavante’s stock at a 24% premium over its closing price of $19.42 on Monday. Shareholders of both companies as well as regulators must sign off on it.

Check Also

By 2030, Cards May Linger, But Digital And Contactless Payments Will Dominate: Report

The future of digital payments is being created now with the adoption of contactless payments, …

Do NOT follow this link or you will be banned from the site!