That’s a juicy slice of new issue paper for investors to feast on, especially given that the primary market has been dominated by amend-and-extend and refinancing activity over the past few months. GTCR will also contribute more than $5bn of equity to the deal.

Back in 2019, FIS acquired Worldpay in a deal valuing the business at an EV of approximately $43bn (including the assumption of debt). Mark Heimbouch, former president and chief operating officer at Worldpay, subsequently became president of FIS’ merchant solutions division.

Four years later in February, FIS took a $17.6bn write-down on the merchant business unit, which includes Worldpay.

“Many things were overvalued in the zero interest rate environment, and so people were paying up ridiculous amounts,” said a buysider. “Back then the estimated trajectory was that this business was going to make more money. Now FIS is taking a loss.”

So how will the company chart a new path under private ownership?

Making bank

As the merchant payments arm of FIS, Worldpay supports more than one million merchants globally, including companies like Netflix, Sotheby’s and Delta.

The company first began as the processing solutions division of Fifth Third Bank. In 2009, the business was spun off and launched as a joint venture between Advent International and Fifth Third. Advent exited the company in 2014, two years after it went public.

From 2011, the company operated as Vantiv until it acquired Worldpay in 2017 and rebranded the combined business under the Worldpay name.

The company’s acquisition by FIS in March 2019 took place the same year as two other multibillion-dollar deals in the payments processing space, including:

• Fiserv's merger with First Data Corporation in January 2019
• Global Payments Inc’s acquisition of Total System Services in May 2019

These deals highlight the opportunity set in global payments. According to a report published by McKinsey last October, the industry’s revenue is expected to top $3trn by 2026.

via McKinsey & Company

As shown by the chart above, global payments revenues have exceeded pre-pandemic levels. The McKinsey analysts further noted that the rapidly evolving geo-political landscape will also create new opportunities for both incumbents and disruptors to win new customers and claim market share.

The unwinding

FIS had ambitious plans for Worldpay — the 2019 acquisition was supposed to “increase Worldpay’s distribution footprint and accelerate its entry into new geographies,” in addition to providing both FIS and Worldpay’s clients with omni-channel payment capabilities, according to a press release announcing the acquisition.

But Worldpay's growth was bottlenecked under FIS’ ownership. In a February earnings call, FIS chief executive officer Stephanie Ferris said that the company ultimately could not support the incremental M&A needed for Worldpay to grow scale.

“I think if you look at our peers, they have been doing M&A over the last couple of years,” Ferris said. “We do believe having a different capital allocation for that business will enable M&A that we just cannot give it inside the parent.”

FIS also received pressure from activist investors D.E. Shaw and JANA Partners in 2022 to review the business and identify opportunities for revenue generation.

Announcing the carve-out, FIS management said the move would allow for both companies to “capitalize on their respective growth and margin opportunities in rapidly evolving markets,” according to an investor FAQ.

via FIS

Worldpay’s carve-out has been welcomed by market participants — Mizuho analysts noted in a July research note that the move “cleans up legacy FIS, reviving the story of a stable, high margin, mid-single digit grower”.

GTCR’s expertise in the payments sector could also help Worldpay keep up with its peers. The private equity firm has committed an additional $1.25bn of equity for the company to pursue “inorganic growth opportunities”.

Earlier in May, GTCR announced that it had raised its largest fund ever, amassing $11.5bn from investors to fund future acquisitions of companies in financial services and technology, healthcare, TMT, in addition to the business and consumer services sectors.

It’s also worth pointing out that GTCR once owned payments processor National Processing Co., which it sold to Worldpay’s predecessor Fifth Third Processing Solutions in 2010.

The offload

Eagerness for new paper aside, sources also expressed a good amount of confidence in Worldpay as a standalone company.

“Electronic payments as a whole continues to grow,” said a portfolio manager. “Assuming this is a scale business where you can leverage a fixed cost base, the EBITDA should hold up pretty well.”

Worldpay on a standalone basis could be levered at approximately 3.7x, based on net debt of $8bn and estimated FY 2025 EBITDA of $2.2bn, according to a pro-forma analysis published by Mizuho analysts in July. That estimate also assumes the majority (around $10bn) of FIS’ $18bn of net debt remains with the parent.

GTCR’s hefty equity injection did not go unnoticed by investors as well.

“To me it’s a reflection of where equity levels are on deals that get done. We’ve seen companies get equity injections to get refis across the line,” said a second portfolio manager. “From what I’ve seen, Worldpay will be in that vein, doesn’t mean they won’t lever it with a dividend or something as soon as they get a chance when rates come down.”

Spokespeople for GTCR, JP Morgan and Goldman Sachs did not return a request for comment. FIS/Worldpay declined to comment.