Fiserv Inc.'s deal to sell a 51% stake in its insurance business is the latest in a series of transactions designed to sharpen its focus on financial technology and payments.
The Brookfield, Wis., company announced the deal Wednesday to sell the stake to Trident IV LP, a private-equity fund managed by Stone Point Capital LLC.
Stone Point would pay $205 million in equity and $335 million in debt, and Fiserv would receive $510 million after taxes. It plans to keep the remaining 49% stake in the business, which would be called Fiserv Insurance Solutions Inc.
"We think the insurance industry is an attractive industry. However, we see such significant opportunity in kind of the core financial services and payments-oriented landscape that we really wanted to make sure that we would be very focused on that space," Jeffery Yabuki, Fiserv Inc.'s president and chief executive, said in an interview Wednesday.
Unlike in the earlier deals it made for this purpose, Fiserv is keeping a stake in the insurance business so it can keep a relationship with insurance providers who may need its services for their banking endeavors, he said. "Over the last five to 10 years a lot of the more innovative entrants into the 'banking' industry have come from nontraditional" providers.
In addition, Fiserv would get more for the rest of Fiserv Insurance Solutions if it waited before selling the 49% stake, Mr. Yabuki said.
"At some point, I suspect that Stone Point and Fiserv will decide together that this will be better as a separate, public company," he said, though this would be "well into the future."
Mr. Yabuki would not discuss any other units his company might sell, but he said Fiserv may make acquisitions in the payment business to complement the December purchase of CheckFree Corp.
Fiserv's board also announced Wednesday that it has authorized the repurchase of up to 10 million common shares, or 6% of its outstanding stock. Fiserv said that much of the funding for this program is coming from the sale of various operations this year, including the insurance deal.
This year Fiserv has shed several units it did not perceive as core to its focus on financial services technology. In January it sold most of its health operations to United Health Group Inc. of Minnetonka, Minn., for $775 million. Fiserv said at the time that the operations were sold because they did not fit with its core strategy.
In February, Fiserv sold its investment support services unit to TD Ameritrade Holding Corp. for $225 million. TD Ameritrade could make an additional $100 million of payments if the unit meets certain revenue targets.
That month Fiserv also sold Del Mar DataTrac Inc., its San Diego mortgage automation unit, back to TVC Capital LLC, the San Diego private-equity fund that sold Fiserv the unit three years earlier. The price was not disclosed.
These deals are part of the Fiserv 2.0 initiative Mr. Yabuki announced in 2006, shortly after he became the CEO, to evaluate all of the company's operations and determine which would fit with his vision of focusing on financial services.
Tien-tsin Huang, an analyst at JPMorgan Securities Inc., wrote in a research note published Wednesday that the deal with Stone Point is "positive, as the insurance businesses have been a drag on organic growth and market expansion."
Moreover, selling the stake would let Fiserv devote more of its attention to integrating CheckFree, "which we continue to view as a compelling transformational deal," Mr. Huang wrote.
The deal is expected to close this month.
