Exclusive-GTCR nears up to $20 billion FIS merchant business deal-sources

By Anirban Sen, David French and Milana Vinn

NEW YORK (Reuters) -Private equity firm GTCR LLC is in advanced talks to acquire a majority stake in the merchant business of payment processing company Fidelity National Information Services Inc in a deal that values the division at between $15 billion and $20 billion, people familiar with the matter said on Monday.

The deal would be the largest in GTCR's history and enable FIS to undo its soured $43 billion acquisition of Worldpay in 2019. Worldpay comprises the bulk of the FIS merchant business, which processes payments for companies.

GTCR's offer prevailed over Advent International, another buyout firm that was also vying for the business, the sources said. If the negotiations conclude successfully in the coming days, FIS plans to keep a minority stake in the business, the sources said.

GTCR plans to finance half of the deal through equity financing and half through borrowing, two of the sources said. The sources requested anonymity and cautioned that deal talks could still collapse at the last minute.

GTCR, FIS and Advent declined to comment.

Such a large leveraged buyout would be a bright spot as expensive and scarcer debt financing and economic uncertainty weigh on dealmaking. Private equity-led buyouts in the first half of 2023 totaled $196.7 billion, down 59% from the year-ago period, Dealogic data shows.

FIS shares closed 6% higher at $58, valuing the company at $34 billion, after the Financial Times reported that buyout groups were weighing buying a majority stake in Worldpay.

Several conglomerates, including General Electric Co, Johnson & Johnson, Kellogg Co and Toshiba Corp, have broken up their sprawling businesses over the past few years as investors pushed for leaner operations and enhanced profitability in some of the core businesses.

FIS's breakup would leave it with a core processing systems business, enabling transactions among banks and other financial institutions, as well as its capital markets division serving investment firms.

FIS launched a strategic review of its operations in December following pressure from hedge funds D.E. Shaw and Jana Partners. Reuters was first to report in February that FIS was preparing to shed its merchants business.

FIS, based in Jacksonville, Florida, said at the time it would pursue a tax-free spin-off of its merchant business and disclosed a $17.6 billion write-down related to its Worldpay acquisition. Analysts have cited under-investment and operational missteps for its unsuccessful integration of Worldpay.

FIS, which started in 1968 and serves big financial services corporations, has cut thousands of jobs since the review began. It plans to cut costs by $1.25 billion in its broader revamp.

The merchants business accounts for about 30% of the company's revenue, while FIS's banking technology arm constitutes about 46%, and capital markets the remainder.

Chicago-based GTCR manages more than $35 billion in assets and invests across sectors, including financial services. In May, GTCR raised its largest buyout fund ever, collecting $11.5 billion from investors.

GTCR's previous financial technology deals include buying mortgage software firm Optimal Blue and selling it to Black Knight Inc in 2020 for $1.8 billion. It also bought Global Claims Service in 2021, which supports property and casualty insurers in handling claims.

(Reporting by Anirban Sen, David French and Milana Vinn in New York; Editing by Greg Roumeliotis and Richard Chang)