Tuesday, May 18, 2010

Fidelity National buyout talks fall apart, so they're gonna party like it's 2006 (FIS)

Shares of Fidelity National Information Services(FIS) are down about 5.5% today, after they ended talks with Blackstone regarding an LBO.

From the NYTimes:

A group of private equity firms led by the Blackstone Group has dropped plans to place a $15 billion bid for Fidelity National Information Services, citing concerns over price, people briefed on the matter told DealBook on Monday.
The group, which also included THL Partners and TPG Capital, refused to meet a demand from Fidelity National’s board for a “substantial increase” over the $32 a share that was proposed, these people said.
Don't worry, the news gets worse.
With the buyout shops out of the picture, FIS is going to "party like it's 2006!"
They're thinking about doing their own "leveraged recapitalization," which involves using debt to fund share buybacks. It is nothing but financial engineering, and it will not result in a more valuable company, just like a person borrowing $50k to buy a new car didn't actually increase their net worth.
JACKSONVILLE, Fla.--(BUSINESS WIRE)--FIS (NYSE: FIS -News), one of the world’s largest providers of banking and payments technology, today issued the following statement:
At this time, discussions have ceased regarding a potential leveraged buyout of FIS. The Company has determined to pursue a leveraged recapitalization with a substantial share repurchase. Further details will be provided as soon as appropriate. There can be no assurance of the potential outcome or timing of this potential recapitalization and share repurchase.

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