Fidelity National Information Services Inc. and SunGard may seem similar in some ways, as they both provide technology services for financial companies.
However, SunGard will enhance the business of Fidelity National Information Services, or FIS, by bringing a “complementary portfolio of products and services,” said FIS President and Chief Executive Gary Norcross.
In a conference call with analysts Wednesday following FIS’ announcement of a $9.1 billion agreement to buy SunGard, FIS officials also said the deal will be highly profitable.
“We believe SunGard is a perfect fit. This is a natural extension of our strategy and creates significant shareholder value,” Norcross said.
While Jacksonville-based FIS provides its technology services mainly for banking operations, Wayne, Pa.-based SunGard provides technology for capital markets and asset and wealth management services, he said.
“We’ve got a lot of commonality in the financial institution side but what’s nice about that is we’re in different sides of the financial institution specifically,” Norcross said.
So while the two companies do business with some of the same large financial firms, the merger will create a wider range of services.
The company expects the merger to immediately increase FIS’ earnings per share once it is completed. Chief Financial Officer James Woodall said it will eventually increase earnings per share by about 20 percent once the company completes the integration of SunGard.
Woodall said the $9.1 billion purchase price includes the assumption of about $4 billion in SunGard debt. FIS will pay 45 percent of the remaining price in cash and 55 percent in FIS stock.
Current FIS stockholders will end up with 87 percent of the company after stock is issued to SunGard’s owners.
Investors liked what they heard from FIS Wednesday, as its stock jumped as much as $5.82 to a new high of $70.79.
“While a very large deal that will require the company to take leverage close to four times pro forma EBITDA (earnings before interest, taxes, depreciation and amortization), we thought management did an effective job explaining the strategic value of the deal on the call this morning,” Avondale Partners analyst Peter Heckmann said in a research note.
“The combination of FIS and SunGard will create a company that is uniquely positioned to market software, data processing, and business process outsourcing to large global financial institutions,” he said.
Robert W. Baird analyst David Koning said FIS’ previous experience in completing large mergers is a plus.
“We note that FIS has a solid track record of achieving targeted cost synergies, and has historically exceeded targets by an average of about 30 percent,” Koning said.
SunTrust Robinson Humphrey analyst Andrew Jeffrey said SunGard is a good addition for FIS.
“Having previously covered SunGard, we like its high margin, scalable and diverse technology offerings and capabilities,” Jeffrey said in a research note.
SunGard was a public company before it was bought out by a group of private equity firms in 2005.
Although FIS expects to cut costs as it completes the acquisition, anticipated in the fourth quarter, the company is not yet giving specifics about the integration of the two companies, including what changes may happen in management.
SunGard has an office in Jacksonville on the Southbank, after Jacksonville City Council approved a $1.02 million incentive package two years ago to help the company move from its Southside office.
SunGard had 80 employees when it filed its application for incentives and promised to add 170 jobs with the move.
The merged company will have more than 55,000 total employees and combined annual revenue of more than $9.2 billion.