The hunt for economies of scale in the
processing sector is taking on a new air of urgency as acquisition
targets – especially in the rapidly consolidating Europe region –
are snapped up by industry players eager to shore up their
competitive positions.

US-based processors have led the chase to
buy up their European counterparts so far, with the likes of First
Data and TSYS moving swiftly to secure footholds across the
region.

Meanwhile, in the US, payment players are busy
re-evaluating their business strategies in the face of changing
payment preferences, most notably the shift towards debit payment
and towards e-commerce channels such as online bill payment and
e-invoicing.

Fidelity National Information Services (FIS)
of the US appears to have navigated its way around both issues with
its announcement it is to acquire Metavante Technologies in an
all-stock deal worth $2.94 billion – a deal which will create one
of the world’s largest providers of integrated payment and
processing services.

In 2008, both companies generated pro forma
combined revenues of $2.5 billion, and it is estimated the merged
entity will generate annual revenues of around $5 billion.

Deal approval expected in
Q3

The deal is expected to be approved in the
third quarter of 2009.

Metavante was spun off by financial services
holding company Marshall & Ilsley in 2007 but its largest
shareholder is an entity affiliated with Warburg Pincus with a
stake of 25 percent, and that entity has entered into a support
agreement with FIS to vote in favour of the transaction.

Metavante has around 8,000 financial services
organisation clients and also has a strong processing foothold in
the UK and continental Europe following its 2008 acquisition of
European prepaid and debit processor Nomad, giving FIS a valuable
entry point into the European payment sector.

Outside of the UK, Metavante has offices in
the Philippines, the Czech Republic, Portugal, Bulgaria and India.
Its card processing arm also operates in Canada and the US.
Metavante is a MasterCard-certified processor for prepaid cards and
the company is also in the process of becoming Visa-certified.

Metavante’s range of products and
services includes account processing, image-based and conventional
cheque processing, electronic funds transfer, consumer healthcare
payments, electronic presentment and payment network solutions,
including the US ATM and PIN NYCE Network.

Future-proofed processor

FIS is a provider of core
processing, card processing and other outsourcing services and has
more than 14,000 financial institution clients in 90 countries
around the world.

The synergies of these business
lines were a big motivation for the deal, along with expected cost
savings of approximately $260 million by 2012.

Beside the need for greater scale, another
factor that brought the two companies together was the need to
‘future-proof’ service capabilities and bring to market more
integrated product offerings in line with changing financial
institution and customer needs.

In a conference call, FIS stated that the deal
had been struck with an eye on the future, particularly as
non-financial institution organisations, such as those in the IT
sector, are considering moving into the payments space.

 

FIS/Metavante
acquisition

Business overview

FIS

Metavante

1,400 core processing customers

850 core processing customers

164 million credit, debit and prepaid cards
processed annually

80 million debit and prepaid cards processed
annually

14,000 clients in 90 countries

8,000 clients in 40 countries

Source: CI, companies