Blackstone Fidelity National Information ServicesDuring The Blackstone Group's (BX) latest earnings conference call on April 23, the mood was upbeat. In fact, there was talk that we could soon see a return of $10 billion to $15 billion leveraged buyout mega-deals.

Well, we may not have to wait long. According to a report in The Wall Street Journal, it looks like Blackstone is considering a deal to buy Fidelity National Information Services (FIS), a leader in electronic payments processing. So far in Thursday's trading, the shares are up 14% to $29.87, pushing the company's market cap above $11 billion.

When including Fidelity National's $3 billion in debt, the enterprise value of the company is now roughly $14.1 billion.

Ideal Buyout Candidate

Taking a look at Fidelity National, it's easy to see way Blackstone would be interested. First of all, the company provides must-have services, such as debit and credit card processing, collection services, payroll cashing, check clearing and settlement, electronic funds transfers and card protection. Such services are highly complicated, and vital, but they aren't the core competences of financial institutions. In fact, Fidelity National has a client base of over 14,000 across over 100 countries.

Next, Fidelity National has a diverse revenue model. It's income sources include maintenance fees, transactions, projects, professional services and projects. Moreover, the fees are mostly recurring, which allows for much predictability.

And because of its leveraged operating model, Fidelity National also generates substantial cash flows, with margins of 28.8% during the latest quarter. This makes it much easier for a firm like Blackstone to finance a deal. According to a recent investor presentation, Fidelity National produced $1.4 billion in EBITDA in 2009.

It's true that Fidelity National isn't growing fast. Then again, the company is fairly stable in any type of economic environment, which is definitely a comfort for lenders. However, as the economy expands over the next few years and Fidelity National continues to penetrate more foreign markets, there could be a bump in top-line growth. There also may be revenue synergies from the company's recent $2.94 billion merger with Metavante Technologies.

However, investors still need to be wary. A deal of this size is complicated and can easily fall apart. But so far, it does look like Blackstone has a smart target on its acquisition radar.

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