Financial technology company FIS (NYSE:) has stated that it will spin off its merchant solutions division, undoing a multi-billion dollar acquisition completed just four years ago, in an effort to increase shareholder growth and returns.
The U.S.-based FIS stated in a statement on Monday that the tax-free separation of the division, which includes the payments processor Worldpay that it acquired for $43 billion in 2019, is expected to be completed within the next twelve months. FIS said that the merger will improve the performance of both organisations, strengthen customer services, and streamline operational management.
“We are confident that this is the ideal time to separate Worldpay,” said FIS Chairman Jeffrey Goldstein.”The rate of problems with payments is going up quickly, so we need to change how our Merchant Solutions business invests in growth and uses its capital.”
FIS said that Charles Drucker, a former Worldpay CEO, had been appointed as a “strategic advisor” in the spin-off procedure. FIS said that Drucker will be back in charge of the company if everything goes as planned with the move.
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The decision is expected to terminate FIS’s decades-long effort to incorporate Worldpay into its larger corporate structure. FIS said that it had “complementary solutions and services” with Worldpay when the merger was first announced.
However, since then, FIS shares have lost more than half of their value. FIS, originally known as Fidelity National Information Services Inc, has come under increased pressure from activist shareholders to reduce the organization’s structure in order to increase earnings.
Analysts at Truist praised FIS for being one of the first so-called FinTech companies to separate its operations, but they warned that there are “few opportunities to meaningfully increase organic revenue growth.”
In a separate statement, FIS provided earnings forecasts for its first quarter and fiscal year that fell short of the Bloomberg average estimate.
In early U.S. trade, FIS’s stock dropped by roughly a sixth.