Fidelity Natl Info Svc Buys Metavante Tech for $2.9B

Fidelity National Information Services, Inc. (NYSE: FIS) and Metavante Technologies, Inc. (NYSE: MV) today announced that the boards of directors of both companies have approved a definitive agreement under which FIS will acquire Metavante. Under the terms of the agreement, Metavante shareholders will receive a fixed exchange ratio of 1.35 shares of FIS common stock for each share of Metavante common stock they own. The pro forma enterprise value of the combined company is approximately $10 billion.
The combination creates an industry leader with enhanced growth prospects. FIS is a leading provider of core and transaction processing services, card issuer solutions and outsourcing services to more than 14,000 financial institutions worldwide. Metavante is a leading provider of banking and payments technologies to approximately 8,000 financial services firms and businesses. Together, the combined company will provide one of the most comprehensive ranges of integrated products and services, across more markets and more geographies worldwide than any other provider in the industry.
The pro forma financial implications are compelling. FIS and Metavante serve complementary customer bases and have highly diversified and recurring revenue streams. In 2008, the companies generated pro forma combined revenue of $5.2 billion, adjusted EBITDA of $1.3 billion and free cash flow of more than $500 million. As a result of the combination, FIS anticipates it will achieve cost synergies of approximately $260 million. The increased global scale and expected cost savings are expected to generate significant margin expansion. The transaction is expected to be accretive to adjusted earnings per share in 2010.
"The combined scale, complementary product capabilities and market breadth of these two great companies will drive significant competitive advantages in the increasingly dynamic marketplace," stated William P. Foley, II, chairman of FIS. "This transaction will further strengthen FIS's competitive position as a leading global provider of technology solutions and enable us to generate increased value for shareholders and customers," added Lee A. Kennedy, FIS president and chief executive officer.
"By bringing these two companies together, we expect to accelerate revenue growth, drive higher profitability, and create greater financial flexibility for growth investments and acquisitions," said Frank R. Martire, Metavante's current chairman and chief executive officer. "In addition, the size, scope and geographic reach of the combined company will offer even greater opportunities to our employees, world-wide."
The leadership team will be comprised of executives from both companies with broad industry experience and strong management depth. Mr. Foley will serve as chairman of the board of FIS. Mr. Kennedy will serve as executive vice chairman of the board with responsibility for integrating the two companies, and Mr. Martire will be named president and chief executive officer of FIS. Reporting to Mr. Martire will be Gary A. Norcross as chief operating officer (current COO of FIS) and Michael D. Hayford as chief financial officer (current president and COO of Metavante). George P. Scanlon (current chief financial officer of FIS) will serve as executive vice president of finance. Following the completion of the transaction, the board of directors will consist of six FIS board members and three Metavante directors. FIS's headquarters will remain in Jacksonville, Florida.
Additional Transaction Details
The transaction will be structured as a tax-free reorganization whereby Metavante will be merged with and into a newly formed subsidiary of FIS. Based on the 1.35 fixed exchange ratio, FIS would issue approximately 162 million basic shares to Metavante shareholders. In addition, a simultaneous equity investment by affiliates of Thomas H. Lee Partners, L.P. and Fidelity National Financial, Inc. in FIS common stock will result in approximately 16 million additional newly issued shares. At closing, the combined company would have approximately 374 million fully diluted shares outstanding. The requisite Metavante lenders have agreed to waive their change of control provisions and permit the merger to proceed. After giving effect to the transaction, the combined company is projected to have approximately $3.8 billion of debt outstanding at closing, including $1.45 billion of debt to be incurred and assumed in connection with the acquisition and will have improved financial leverage and credit statistics.
Approvals and Anticipated Closing
The transaction is subject to approval by FIS and Metavante shareholders, receipt of regulatory approvals and the satisfaction of customary closing conditions. Metavante said that its largest shareholder, an entity affiliated with Warburg Pincus that currently owns 25% of the outstanding common stock of Metavante, has entered into a Support Agreement with FIS pursuant to which it has agreed, subject to the terms and conditions of the Support Agreement, to vote in favor of the transaction. Upon completion of the deal, Warburg Pincus will be the largest single shareholder of the new company with approximately 11% ownership and will have board representation. FIS and Metavante expect to complete the transaction in the third quarter of 2009.
2009 Guidance
FIS will update its fiscal 2009 guidance to include the acquisition of Metavante following the completion of the transaction. Separately, FIS and Metavante have reiterated the respective guidance each had previously provided in February 2009.
Advisors
Banc of America Securities LLC and Goldman, Sachs & Co. acted as financial advisors to FIS and Wachtell, Lipton, Rosen & Katz provided legal counsel. Barclays Capital acted as financial advisor to Metavante, while Kirkland & Ellis LLP and Quarles & Brady LLP provided legal counsel.