By Scott Kanowsky
Investing.com -- Financial technology firm FIS (NYSE:FIS) has announced that it will spin off its merchant solutions unit, undoing a multi-billion dollar purchase it made just four years ago, in a bid to enhance growth and returns for shareholders.
In a statement on Monday, the U.S.-based FIS said the tax-free carving-out of the division, which includes the payments processor Worldpay that it bought for $43 billion in 2019, is anticipated to be completed within the next twelve months. The transaction will improve both companies' performance, strengthen client services and simplify operational management, FIS argued.
“We are confident that this is the right time for the separation of Worldpay," said FIS chairman Jeffrey Goldstein. "The pace of disruption in payments is rapidly accelerating, requiring increased investment in growth and a different capital allocation strategy for our Merchant Solutions business."
FIS added that Charles Drucker, who previously served as chief executive of Worldpay, has been named a "strategic advisor" in the spin-off process. Should the move be completed as expected, Drucker will retake his position at the helm of the company, FIS announced.
The decision is set to bring an end to FIS' long-standing push to fold Worldpay into its broader corporate structure. When the deal was first unveiled, FIS claimed that it had "complementary solutions and services" with Worldpay.
Since then, however, shares in FIS have dipped by more than half their value. FIS - formerly known as Fidelity National Information Services Inc - has subsequently come under increasing pressure from activist shareholders to streamline the structure of the business to boost profits.
Analysts at Truist praised FIS for being one of the first so-called FinTech companies to break up its operations, but flagged that it still sees "little opportunity to materially accelerate organic revenue growth."
In a separate announcement, FIS delivered earnings guidance for its first quarter and fiscal year that missed Bloomberg consensus expectations.
Shares in FIS slumped by nearly a sixth in early U.S. trading.