Worldpay Acquisition

9 Months Ended

Sep. 30, 2019

On July 31, 2019, FIS completed the acquisition of Worldpay by acquiring 100 percent of Worldpay's equity pursuant to the merger agreement. Through its acquisition of Worldpay, FIS is now a global leader in technology, solutions and services for merchants, as well as banks and capital markets. The Worldpay acquisition brings an integrated technology platform with a comprehensive suite of products and services serving merchants and financial institutions. Through the Worldpay acquisition, FIS has enhanced global payment capabilities, robust risk and fraud solutions and advanced data analytics.

At the closing, Worldpay shareholders received approximately 289 million shares of FIS common stock and $3.4 billion in cash, using an exchange ratio of 0.9287 FIS shares plus $11.00 in cash for each share of Worldpay common stock. The acquisition-date fair value of the 289 million shares of the Company’s common stock was determined based on the share price of $133.69 per share, the closing price of the Company’s common stock on the New York Stock Exchange on July 30, 2019, since the acquisition closed before the market opened on July 31, 2019. FIS also converted approximately 8 million outstanding Worldpay equity awards into corresponding equity awards with respect to shares of FIS common stock pursuant to an exchange ratio in the merger agreement designed to maintain the intrinsic value of the applicable award immediately prior to conversion. The fair value of the converted equity awards was approximately $789 million based on a valuation as of the date of closing. The amounts attributable to services already rendered were included as an adjustment to the purchase price and the amounts attributable to future services will be expensed over the remaining vesting period. In connection with the Worldpay acquisition, FIS also repaid approximately $7.5 billion of Worldpay debt, including $5.7 billion for Worldpay debt that was not contractually assumed in the acquisition and was included as an adjustment to the purchase price. FIS funded the cash portion of the merger consideration, the pay-off of the indebtedness of Worldpay and the payment of transaction-related expenses through a combination of available cash-on-hand and proceeds from debt issuances, including proceeds from concurrent public offerings on May 21, 2019 of Euro-, Pound Sterling-, and U.S. Dollar-denominated senior unsecured notes and borrowings under the Euro-commercial paper program established on May 29, 2019. See Note 7 for further discussion of these debt issuances.

The total purchase price was as follows (in millions):



Cash consideration	$	3,423
Value of FIS share consideration	38,635
Pay-off of Worldpay long-term debt not contractually assumed	5,738
Value of outstanding converted equity awards attributed to services already rendered	449
Total purchase price	$	48,245

The acquisition was accounted for as a business combination under FASB Accounting Standards Codification Topic 805, Business Combinations (“Topic 805”). We recorded a preliminary allocation of the purchase price to Worldpay tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of July 31, 2019. The provisional amounts for intangible assets are based on third-party valuations performed. Goodwill was recorded as the residual

amount by which the purchase price exceeded the provisional fair value of the net assets acquired. Goodwill consists primarily of expected synergies of combining operations, the acquired workforce, and growth opportunities, none of which qualify as separately identifiable intangible assets. Our evaluations of the facts and circumstances available as of July 31, 2019, to assign fair values to assets acquired and liabilities assumed are ongoing, including our assessments of the economic characteristics of the acquired software and other intangibles. These evaluations may result in changes to the provisional amounts recorded.

Pursuant to Topic 805, the financial statements will not be retrospectively adjusted for any provisional amount changes that occur in subsequent periods. Rather, we will recognize any provisional amount adjustments during the reporting period in which the adjustments are determined. We will also be required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of any change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. We expect to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

The preliminary purchase price allocation was as follows (in millions):



Cash acquired	$	305
Settlement deposits and merchant float (1)	2,447
Trade receivables	1,619
Goodwill	38,428
Intangible assets	13,682
Computer software	1,293
Other noncurrent assets (2)	1,386
Accounts payable, accrued and other liabilities	(1,013		)
Settlement payables	(3,167		)
Deferred income taxes	(2,822		)
Long-term debt, subsequently repaid	(1,805		)
Other liabilities and noncontrolling interest (3)	(2,108		)
Total purchase price	$	48,245

(1)Includes $1,693 million of merchant float.

(2)Includes $534 million of other restricted cash.

(3)Includes $890 million of long-term tax receivable agreement liability (see Note 10) and $710 million contingent value rights liability (see Note 5).

The gross contractual amount of trade receivables acquired was approximately $1,666 million. The difference between that total and the provisional amount reflected above represents our best estimate at the acquisition date of the contractual cash flows not expected to be collected. This difference was derived using Worldpay's historical bad debts, sales allowances and collection trends.

Intangible assets primarily consist of computer software, customer relationship assets and trademarks with weighted average estimated useful lives of 7 years, 10 years and 5 years, respectively, and provisional fair value amounts assigned of $1,293 million, $13,272 million and $410 million, respectively.

See Note 10 for acquired contingencies resulting from the Worldpay acquisition.

Unaudited Supplemental Pro Forma Results Giving Effect to the Worldpay Acquisition

Worldpay's revenues and pre-tax loss of $734 million and $162 million, respectively, which include the impact of purchase accounting adjustments, are included in the Condensed Consolidated Statements of Earnings (Unaudited) for the period from July 31, 2019 through September 30, 2019.

Pursuant to ASC 805, unaudited supplemental pro forma results of operations for the three and nine months ended September 30, 2019 and 2018, assuming the acquisition had occurred as of January 1, 2018, are presented below (in millions, except per share amounts):



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Revenue	$	3,154	$	3,109	$	9,380	$	9,149
Net earnings (loss) attributable to FIS common stockholders	$	220	$	14	$	370	$	(225	)
Net earnings (loss) per share — basic attributable to FIS common stockholders	$	0.36	$	0.02	$	0.60	$	(0.36	)
Net earnings (loss) per share — diluted attributable to FIS common stockholders	$	0.36	$	0.02	$	0.60	$	(0.36	)

The unaudited pro forma results include certain pro forma adjustments to revenue and net earnings that were directly attributable to the acquisition, assuming the acquisition had occurred on January 1, 2018, including the following:


•	additional amortization expense that would have been recognized relating to the acquired intangible assets;


•	adjustment to interest expense to reflect the removal of Worldpay debt and the additional borrowings of FIS in conjunction with the acquisition; and

•

a reduction in expenses for the three and nine months ended September 30, 2019 of $149 million and $210 million, respectively, and an increase in expenses for the three and nine months ended September 30, 2018 of $8 million and $267 million, respectively, for acquisition-related transaction costs and other one-time non-recurring costs.