Metavante to be acquired by Fidelity National

Financial technology provider Metavante Technologies Inc. of Brown Deer has agreed to be purchased by Fidelity National Information Services Inc., a Jacksonville, Fla., provider of core and transaction processing services, in exchange for nearly $3 billion in Fidelity stock.

The transaction also includes equity investments from by affiliates of Thomas H. Lee Partners LP and Fidelity National Financial Inc. in Fidelity common stock which will result in approximately 16 million additional newly issued shares.

Together, the combined company will provide one of the most comprehensive ranges of integrated products and services, across more markets and more geographies worldwide than any other provider in the industry, Fidelity said in a press release.

Fidelity National (NYSE: FIS) is a major provider of core and transaction processing services, card issuer solutions and outsourcing services to more than 14,000 financial institutions worldwide. Metavante (NYSE: MV) provides banking and payments technologies to approximately 8,000 financial services firms and businesses.

The two companies serve complementary customer bases and have highly diversified and recurring revenue streams. In 2008, the companies generated pro forma combined revenue of $5.2 billion, adjusted earnings before expenses of $1.3 billion and free cash flow of more than $500 million. As a result of the combination, Fidelity anticipates it can cut approximately $260 million in costs. The increased global scale and expected cost savings are expected to generate significant margin expansion. The transaction is expected to boost adjusted earnings per share in 2010.

As of Dec. 31, 2008, Metavante employed approximately 5,900 employees, including approximately 2,100 in financial solutions group, 2,100 in payment solutions group, 1,200 in shared services such as operations and conversions, and 500 in corporate functions. The Milwaukee-area offices include the corporate headquarters at 4900 W. Brown Deer Road in Brown Deer and offices on Milwaukee’s far northwest side.

Metavante chairman and CEO Frank Martire will become president and CEO of Fidelity after the merger. Fidelity president and CEO Lee Kennedy will be named chairman of the board. The board will consist of six Fidelity National board members and three Metavante board members. The business will be based at Fidelity's current headquarters in Jacksonville, Fla.

Other Metavante executives to remain with the combined company include Michael Hayford, Metavante's current president and chief operating officer. He will become Fidelity's chief financial officer.

Under the terms of the agreement, Metavante shareholders will receive a fixed exchange ratio of 1.35 shares of Fidelity common stock for each share of Metavante common stock they own. At Fidelity's Tuesday closing price of $18.20 per share, the stock transaction is worth about $2.95 billion.

The exchange rate would give Metavante's shareholders a 23 percent premium over Tuesday's closing price of $19.96 a share.

Metavante's largest shareholder, an affiliate of private equity firm Warburg Pincus that owns 25 percent of Metavante's outstanding shares, has agreed to support the transaction. Warburg Pincus is expected to own 11 percent of the combined company.

The transaction is subject to approval by shareholders of both Fidelity and Metavante. The deal also requires regulatory approvals and the satisfaction of customary closing conditions. The firms expect to complete the transaction during the third quarter of 2009.

At closing, the combined company would have approximately 374 million shares outstanding. Metavante's lenders have agreed to waive change of control provision, allowing the merger to proceed. After giving effect to the transaction, the combined company is projected to have approximately $3.8 billion of debt outstanding at closing, including $1.45 billion of debt to be incurred and assumed in connection with the acquisition.