Investing.com -- Fitch Ratings has revised the outlook for Fidelity National Information Services (NASDAQ: III ), Inc. (FIS) from positive to stable, following FIS’s announcement of acquiring the Issuer Solutions business from Global Payments , Inc. (NYSE: GPN ) for $13.5 billion. Concurrently, FIS will divest its 45% stake in Worldpay for a total enterprise value of $24.25 billion. Fitch affirmed the Long-Term Issuer Default Rating (IDR), senior unsecured revolver, and senior notes ratings for FIS at ’BBB’.
The revision in outlook is due to heightened risks from multiple, large-scale transactions and increased leverage amidst an uncertain macroeconomic environment. FIS remains committed to maintaining strong investment-grade ratings and aims to reduce gross leverage to levels that Fitch deems suitable for the IDR within 12 to 18 months after the transactions close. Despite this, Fitch acknowledges the significant execution and financial risk associated with large mergers and acquisitions. The transactions are expected to close in early 2026.
Fitch perceives the pending GPN transactions as beneficial to FIS’s long-term credit profile, despite the near-term risk due to the size of the transactions. The $13.5 billion acquisition of GPN’s card issuing business is projected to increase FIS’s revenue and EBITDA by approximately 25%. The acquired business has a significant market share in the U.S. and parts of Europe, diversifying FIS’s card processing business which is currently highly debit-centric.
The divestiture of Worldpay to GPN reduces complexity, but also introduces execution risk in the near-term. The sale price, although higher than the sale of its 55% majority stake in 2024, is significantly lower than the $42 billion paid in 2019 when acquired. In 2024, FIS sold a 55% majority stake in Worldpay to private equity funds managed by GTCR, LLC.
FIS has a relatively stable business model, with revenue growth of low-single digits or better annually over the past decade. Its technology is critical, as demonstrated by its market presence, and it benefits from long-term contracts and high renewal rates. FIS is enhancing profitability with various cost-saving measures for margin expansion. It aims for $790 million in cost savings by the end of 2026, involving customer service optimizations, outsourcing, back-office consolidation, and headcount reductions. It also anticipates over $100 million in cost synergies from the Issuer Solutions acquisition.
FIS is committed to maintaining solid investment-grade ratings, demonstrated by its use of Worldpay cash proceeds in 2024 for debt reduction. Fitch expects conservative credit metrics over time, as bank regulators assess the financial stability of vendors like FIS. EBITDA leverage is anticipated to be elevated in the mid-3.0x range following the completion of pending deals, but management aims to reduce it to below 3.0x within 12 to 18 months, targeting gross leverage around 2.8x.
FIS benefits from outsourcing trends that Fitch expects to continue in the future. Banks and other financial institutions rely on third-party technology suppliers to focus on core competencies, streamline processes, and reduce costs. Fitch believes FIS’s diverse portfolio of services will be a competitive advantage as customers consolidate vendors.
Fitch expects continued acquisitions over time and/or divestitures, as evidenced by the pending deals with GPN. Any material M&A will likely be paused in 2026 until leverage is reduced following the GPN deals. The company previously completed multiple large-scale deals, including its 2019 purchase of Worldpay for $42 billion and its 2015 acquisition of SunGard for $9.1 billion.
FIS’s ratings and Outlook are supported by the company’s high mix of recurring revenue, sticky customer base, market leadership in its core businesses, and predictable cash flow generation. Peers include Global Payments, Inc., PayPal (NASDAQ: PYPL ) Holdings, Inc. (A-/Stable), Euronet Worldwide (NASDAQ: EEFT ), Inc. (BBB/Stable), Block, Inc. (BB+/Positive), and Boost Newco Borrower, LLC. Relative to these peers, Fitch believes that FIS is positioned well at the ’BBB’ rating due to its moderate revenue growth, stable and growing EBITDA/margins, reasonable EBITDA leverage, and strong FCF generation.
Rating constraints include highly competitive end markets and acquisition risk surrounding large-scale M&A. FIS was historically successful at driving synergies with large deals, including Worldpay and SunGard. However, future M&A involves various risks (e.g., integration, customer losses, financing) that could affect the ratings over time.
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