Shares of Fidelity National Information Services Inc. soared more than 15% Thursday after The Wall Street Journal reported that the Blackstone Group LP private-equity firm was in talks to buy the Jacksonville, Fla., provider of banking technology.
Fidelity and Blackstone spokeswomen declined to comment.
Fidelity's shares hit a new 52-week high of $30.78 before closing up 10.3% from Wednesday, at $28.68.
Greg Smith, a managing director at Duncan-Williams Inc. who follows the sector, said he is "not overly surprised" that Fidelity would be an acquisition target, given "prior leveraged buyout interest" in the industry. For example, Kohlberg Kravis Roberts & Co. bought Fidelity competitor First Data Corp. for about $29 billion in 2007.
First Data and its rivals have several features that are attractive to private-equity investors, including a "high degree of recurring revenue, strong free cash flow and relatively low valuations," Smith said. "I think you have all of that with FIS today."
Last week Fidelity reported its first-quarter revenue surged 57.4% from the year earlier, to $1.25 billion, fueled by higher demand for its technology and its 2009 purchase of competitor Metavante Inc.
Fidelity has done a good job of integrating Metavante's operations into its own, Smith said, which makes a potential buyout somewhat puzzling.
"Everything appears to be going well," he said. "It just doesn't seem to hit on the opportunity to somehow greatly improve the earnings above and beyond what the company's already doing." He downgraded his Fidelity recommendation Thursday from "buy" to "hold."
The Journal, citing unnamed sources, reported that the potential buyout faces several hurdles and could fall apart.