There’s going to be a new global giant in the payments business.
Fidelity National Information Services (ticker: FIS) said Monday that it had agreed to buy Worldpay (ticker: WP) for $34 billion in stock for a record international payments deal.
FIS, which provides bank-office, credit-card processing and ATM services to banks, is a relatively small player in the payments business while Worldpay is a leader in that space, processing more than 40 billion transactions a year.
The two companies said in a statement that they will focus on the “high-growth e-commerce” services.
Shares of FIS are down almost 2% so far in trading Monday, while Worldpay stock surged about 9%
There’s been a surge in mergers and acquisitions recently in the payments space. In January Fiserv agreed to buy First Data (FDC) for $22 billion.PayPal Holdings (PYPL) acquired iZettle for $2.2 billion last May, and private-equity firms have bought European firms Nets and Paysafe Group.
The consolidation in the industry is largely the result of companies looking to gain pricing power by increasing market share, upgrading technology, and cutting costs.
A rising global tide of electronic payments, particularly from online shopping, has lifted of companies such as PayPal over the last several years. It has also increased the premium for startups that have shown that they can add either tech know-how or customers to established companies.
FIS’ acquisition of Worldpay “creates a powerhouse payments company and transforms FIS into a faster growing entity,” Cowen analyst George Mihaloswrote in a note to clients. The deal, he believes, “will accelerate total company growth meaningfully.” He rates FIS at Outperform with a $119 price target.