Fidelity National Information Services Inc. plans a recapitalization and share buyback after an investor group ended talks to acquire the company in what would have been the largest leveraged buyout in three years.
"Further details will be provided as soon as appropriate," Fidelity said Tuesday in a press release. "There can be no assurance of the potential outcome or timing of this potential recapitalization and share repurchase."
Blackstone Group LP, Thomas H. Lee Partners LP and TPG Capital dropped a plan to bid for Fidelity, of Jacksonville, Fla., two people familiar with the decision said Monday.
The news hit Fidelity's share price. At midmorning Tuesday, its shares were at $27.43, down 5.02% from Monday's close.
Talks fell apart as Fidelity sought a higher price, said the people, who declined to be identified because the negotiations are private. The private-equity firms had offered more than $15 billion, or about $32 a share, according to the people.
That would have been the largest leveraged buyout since Blackstone's $20 billion takeover in July 2007 of what's now known as Hilton Worldwide. The breakdown of talks underscores the fragile recovery of buyouts, which surged to a record $1.6 trillion from 2005 to 2007 before the financial crisis froze credit markets.
"What we had a couple years ago was a once-every-30-years environment, and you don't expect that to come back anytime soon," said Steven Kaplan, a professor at the University of Chicago Booth School of Business. "The fact that they were considering it and that the banks were willing to do it means the market has thawed."
Buyouts announced by private-equity firms are at $25.2 billion so far this year, compared with $5.71 billion during the same period in 2009, according to data compiled by Bloomberg News. The firms are eager to spend the $500 billion of committed, unspent capital from institutional investors, according to Preqin Ltd., which provides research to private-equity companies. "They want to do deals because of the capital overhang," Kaplan said.
Blackstone and the other managers envisioned a deal that involved about $5 billion of equity they and additional buyout firms would commit, and banks had offered about $10 billion in financing, according to a person familiar with the deal.
Bank of America Corp., Barclays PLC, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG and JPMorgan Chase & Co. were among the banks working on financing the takeover, said other people with knowledge of the matter.
Fidelity processes payments and issues cards for more than 14,000 financial companies globally. It had a profit of $105.9 million in 2009 on revenue of $3.77 billion.