Fidelity National Stock Sinks. It Will Spin Off Worldpay and Issues Guidance Miss.

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Payments giant

Fidelity National Information Services

said Monday it plans to spin off its merchant business, essentially undoing its $43 billion acquisition of Worldpay in 2019.

FIS

(ticker: FIS) said it expects the tax-free spin-off to be completed within a year and that the two companies will maintain a commercial relationship. The move comes after the company announced a strategic review of its business and operations in December under new CEO Stephanie Ferris.

The shares fell nearly 13% in premarket trading Monday.

The company’s merchant solution business will operate as Worldpay once the separation is completed. FIS said the split will allow the company to target a strong investment-grade credit rating, while also enabling Worldpay to “invest more aggressively for growth.”

“FIS management and the board concluded that the spinoff of Worldpay will unlock shareholder value by improving both companies’ performance, enhancing client services, and simplifying operational management,” FIS Chairman Jeffrey Goldstein said in a statement.

Raymond James analysts, led by John Davis, said the sum-of-the-parts math was “simply too compelling to ignore.” They said that the merchant business was currently being valued at “only” around $5 billion by the market and the spinoff should “create significant shareholder value.” They have a Strong Buy rating on the stock.

The payments conglomerate also reported fourth-quarter earnings Monday, which narrowly beat estimates. Adjusted earnings per share fell 11% to $1.71 but were higher than the FactSet consensus for $1.70. Revenue of $3.71 billion also topped analysts’ expectations of $3.69 billion.

For full-year 2023, FIS said it expected earnings of $5.70 to $6 a share, lower than the consensus of $6.57.

Jefferies analysts, led by Trevor Williams, said the company’s outlook “underscores continued softness in the core businesses.” They maintained a Hold rating on the stock.

Write to Callum Keown at [email protected]