Fidelity National Information Services (FIS) has agreed an all stock deal worth around $2.94 billion to buy Metavante Technologies, creating the world's largest provider of integrated payment and financial processing services.
The boards of both companies have approved a definitive agreement under which Metavante shareholders will receive a fixed exchange ratio of 1.35 shares of FIS common stock for each share Metavante stock.
FIS will issue around 162 million basic shares - which closed yesterday at $18.20 - to Metavante shareholders, valuing the deal at around $2.94 billion.
In addition, equity investments by affiliates of Thomas H Lee Partners and Fidelity National Financial in FIS common stock will result in approximately 16 million additional newly issued shares.
Metavante says that its largest shareholder, an entity affiliated with Warburg Pincus that currently owns 25% of the outstanding common stock, has entered into a Support Agreement with FIS to vote in favour of the transaction.
Metavante, which was spun off by US financial services firm Marshall & Ilsley in 2007, provides banking and payments technologies to about 8000 financial services firms and businesses.
FIS says the two firms "serve complementary customer bases and have highly diversified and recurring revenue streams". In 2008, they generated pro forma combined revenue of $5.2 billion and adjusted Ebitda of $1.3 billion.
FIS says it expects to save costs of around $260 million from the deal and the transaction should add to earnings in 2010. The pro forma enterprise value of the combined company is approximately $10 billion.
"The combined scale, complementary product capabilities and market breadth of these two great companies will drive significant competitive advantages in the increasingly dynamic marketplace," says William Foley, chairman, FIS.
Foley will serve as chairman of the board with Lee Kennedy, FIS president and CEO acting as executive vice chairman with responsibility for integrating the two companies. Frank Martire, chairman and CEO, Metavante, will be named president and chief executive officer of FIS.
The deal is expected to be closed by the fourth quarter, subject to shareholder and regulatory approval.
FIS shares slipped 86 cents, or 4.73%, to $17.34 in early morning trading. Metavante shares rose $2.50, or 12.53%, to $22.46.