Global payment solutions provider
Fidelity National Information Services Inc.
) has wrapped up the divestiture of its Healthcare Solution
business to Lightyear Capital, a private equity firm, for $335
million. Fidelity expects to receive $220 million in net proceeds
after tax from the sale.
Fidelity's healthcare solutions business comprised the Consumer
Driven Healthcare Solutions and Health and Financial Network
Solutions segments, catering to consumers, healthcare providers and
payers by providing services in the form of benefits
administration, account processing and payment fulfillment.
Fidelity's move to sell the business accentuates the fact that
the company wants to focus on its core payment solutions and
services segment for financial institutions. The leading banking
and payments technology solutions provider has a strong clientele
of financial institutions globally.
We believe that the company's focus on the core segment of the
Financial Solutions Group ("FSG") is a prudent measure that should
offset the sluggish growth in its Payment Solutions Group ("PSG").
Incidentally, the divested business was a part of PSG.
In the recently concluded quarter, FSG revenue climbed 9.1% year
over year to $563.4 million (7.8% organically) on the back of
growth in account processing and higher services revenue. However,
PSG revenue increased marginally to $630.6 million.
The divested business was categorized as discontinued operations
and negatively impacted the earnings per share by 2 cents in the
last concluded quarter. The company lowered its fiscal 2012
earnings guidance by approximately 7 cents, but it is expected that
fiscal 2013 results will not be impacted by the sale of the
We believe that Fidelity's commanding position in the financial
services market, its increasing international exposure, recurring
revenue model, diversified product portfolio, cost synergies from
acquisitions and loyal customer base will drive growth over the
long term. We also believe that Fidelity's expansion into emerging
markets such as Brazil and Europe will drive organic revenue growth
However, increasing consolidation in the banking sector, a
challenging environment for the Payments Solutions business and an
uncertain regulatory environment are the primary headwinds, in our
We maintain our Neutral recommendation on a long-term basis (for
the next 6 to 12 months), primarily due to a highly leveraged
balance sheet and intense competition from other major players such
Moreover, FIS expects the second half of 2012 to be much more
challenging in terms of margin expansion due to planned client
deconversion, tough year-over-year comparisons and a lack of
visibility around its Visa pricing plans.
Currently, Fidelity has a Zacks #4 Rank, which implies a
short-term Sell rating (for the next 1-3 months).
FIDELITY NAT IN (FIS): Free Stock Analysis
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