Breakingviews: Worldpay hands planet-sized lucre to buyout barons

Worldpay is a prime exhibit of how sharp-toothed buyout barons are masters of getting a good deal from a flailing industry. The payment processor once part of Royal Bank of Scotland has changed hands four times between 2010 and 2023. Now majority owner GTCR is shuffling it to U.S.-based Global Payments. All along, the only reliable outcome has been profits for private equity firms.

Worldpay, which helps merchants take payments in stores and online, was first acquired by Bain Capital and Advent in 2010. It listed in 2015, merged with a rival in 2017, and was then sold to industry giant Fidelity National Information Services (FIS) in 2019 for $43 billion, including debt. By the time FIS offloaded a majority stake to private equity group GTCR in 2023, its value had plunged to $17.5 billion. Now Worldpay is at the centre of a three-way deal, announced Thursday, that puts a $23 billion price tag on it.

The latest transaction represents an admission by both Global Payments and FIS that serving both merchants and banks does not work. The duo’s shares had sunk by more than 40% in the five years through Wednesday, while the S&P 500 Index rose 88%. Now they are each trying to focus on one aspect of the industry. Global Payments will bulk up in the merchant business by absorbing Worldpay. Meanwhile, FIS will hand over cash and its 45% stake in the company in return for its rival’s unit which serves credit-issuing institutions.

FIS’s minority stake is worth $6.6 billion, after deducting $800 million it must hand to GTCR for a change in control. That covers roughly half of the $13.5 billion FIS is paying for Global Payments’ Issuer Solutions unit.

GTCR makes out better on its 55% equity stake in Worldpay, which it bought using over $5 billion in equity. It will receive 59% of the payment in cash and the remaining 41% in the form of Global Payments stock, giving it a 15% stake in the enlarged company. At the issue price of $97 per share, that implies it’s getting 43 million shares with a value of $4 billion, and $6 billion in cash. Throw in the change-of-control payment from FIS, and the buyout firm has more than doubled its money in less than two years.

That’s a home run at a time when private equity groups are starved of success. There is a caveat, though: Global Payments’ stock slumped by more than 15% after announcing the deal, reducing the value of GTCR’s payout to around $10 billion. Global Payments CEO Cameron Bready reckons he can extract $800 million of extra profit by cutting costs and boosting revenues. Whether he succeeds will determine just how well private equity does from the latest trip on the Worldpay rollercoaster.