Fidelity Information Services (FIS) is to merge with Florida-based Certegy, a publicly-traded provider of card and cheque payment processing services, under a stock-for-stock deal that will give it majority control of the new combined public company.
Under the merger agreement, each share of FIS common stock will be exchanged for 0.6396 shares of Certegy common stock.
The deal will give Certegy shareholders a 32.5% stake in the combined company. FIS will own the remaining stake, with parent company Fidelity National Financial owning 50.3% directly.
Certegy says it will pay a $3.75 per share special cash dividend to its shareholders prior to the closing of the transaction.
FNF ditched plans to spin-off its information services unit in September last year. The group had filed for a $500 million IPO in May and intended to separate the unit into a new IT entity. The group later decided to recapitalise the information services unit and sell a 25% stake to equity firms Thomas H Lee Partners and Texas Pacific Group for $500 million.
The group says the new combined company will become Fidelity National Information Services and it is expected that its shares will trade on the New York Stock Exchange under the trading symbol 'FIS'.
William Foley, chairman and CEO, FNF, says the combined company will have nearly $4 billion of diversified, run-rate revenue and $1 billion of run-rate EBITDA.
"Our businesses are complementary, rather than competitive and we believe there are some very significant and unique revenue synergy opportunities, particularly in the community bank, credit union and international markets. We also believe there are meaningful cost synergies to be recognised by eliminating many redundant and duplicative functions through the combination of the two organisations," says Foley.
Foley will serve as chairman of the board of directors of FIS, which will consist of ten directors, with four directors from the current FIS board, and four directors from the current Certegy board, including its current chairman Lee Kennedy and one director from each of Thomas H. Lee Partners and Texas Pacific Group.
The deal is subject Certegy stockholder approval.