Executives frequently said they hoped that spinning off Fidelity National Information Services Inc. from its majority owner would boost its value, and the plan has paid off handsomely for three private-equity investors.
In conjunction with the spinoff from Fidelity National Financial Inc., which was completed Thursday, the three investor groups - Thomas H. Lee Partners, Texas Pacific Group, and Evercore Partners Inc. - sold 5.5 million shares in the Jacksonville, Fla., technology vendor to the investment bank Bear, Stearns & Co. Inc. in a block trade.
Bear Stearns, in several large trades, then resold the shares to index funds that replicate the S&P 500 index. Standard & Poor's Corp. announced this month that Fidelity National Information would join its index of 500 large companies on the completion of the spinoff, and the index funds needed to acquire its shares.
Nikolai Fisken, an analyst at the investment bank Stephens Inc. in Little Rock, said the private-equity firms received "outstanding" returns on their investment in Fidelity Information Services. They paid $500 million for a 25% stake in the company in December 2004; that ended an effort by Fidelity National Financial to take the technology business public.
Fidelity National Information became a public company by merging with the publicly-traded transaction processing company Certegy Inc. in February.
By Mr. Fisken's accounting, the private-equity investors bought in at about $15, and sold at close to Thursday's closing price of $41.35 - a return of 175% in less than two years. The stock closed at $42.46 Wednesday, in anticipation of the spinoff.
Block trades of this type are often discounted from the market price of a stock, but Mr. Fisken, who rates Fidelity shares "overweight," estimated that the discount in this case would be "measured in pennies."
"There's not a lot of risk, because you're taking it from the private-equity guys and selling it straight to the index funds," he said.
According to company filings, the equity firms paid a 5-cent underwriting discount, and after the sale owned a total of 25.2 million shares.
Spokesmen for Texas Pacific, Thomas H. Lee, and Evercore would not comment on their plans for those holdings.
Mr. Fisken said, "I would expect the rest of the stock to hit the market in the near term."
David J. Koning, an analyst at the brokerage firm Robert W. Baird & Co., agreed that the private-equity firms probably would sell the rest of their Fidelity holdings - "these guys usually want to exit public companies" - but said it would be hard to guess the timing of such sales.
From an operational standpoint, the completion of the spinoff means "one less thing to take focus away from executing their strategy," said Mr. Koning, who rates Fidelity's stock "outperform."
"This is a company that is executing really well right now," Mr. Koning said, pointing to its strong third-quarter results. "We're really encouraged by the execution there."
Fidelity National Information last month reported third-quarter revenue of $1.1 billion, nearly equal to the $1.16 billion reported by Fiserv Inc., the longtime leader in the bank core-processing software and services market.
With the completion of the spinoff, Mr. Koning said he believes Fidelity will be "a quieter company" that looks more like Fiserv operationally and is likely to make fewer, and smaller, deals in the future.
Mr. Fisken noted as well that Fidelity's board had authorized a $200 million stock buyback plan and that the company is carrying $2.9 billion of debt on its balance sheet. Because of those two factors, he said, "You're going to see them take a pass on most acquisitions, except the small stuff."
