Banking and payment technologies provider Fidelity National Information Services, Inc. (FIS) Wednesday said it agreed to acquire rival Metavante Technologies, Inc. (MV) in an all stock deal valued at about $2.95 billion. The deal has the approval of the board of both the companies. The company said the deal, which is expected to close in fiscal 2009 third quarter, is expected to add to its adjusted earnings per share in fiscal 2010.

Metavante Technologies, spun-off from Marshall & Ilsley Corp. (MI) in November 2007, has been offering processing services to about 8,000 financial institutions of all sizes for more than 40 years. Services include outsourced deposit, loan, and trust account processing, check processing, electronic funds transfer, commercial treasury services, and health care payments services.

The combination is expected to create a company with a pro forma enterprise value of $10 billion and the world's largest provider of comprehensive integrated payment and financial core processing services. Pursuant to the completion of the deal, Milwaukee, Wisconsin-based Metavante would merge with and into a newly formed wholly-owned subsidiary of Fidelity and would remain headquartered at Jacksonville, Florida.

Under the terms of the deal, Metavante shareholders would receive a fixed exchange ratio of 1.35 shares of Fidelity common stock for each share of Metavante common stock they own.

The offer, which values Metavante stock at about $24.57 per share, represents a 23% premium for Metavante shareholders, based on the closing price of Metavante common stock of $19.96 per share on Tuesday. Fidelity said that it would issue a total of 162 million basic shares to Metavante shareholders at a ratio of 1.35 shares for each Metavante share. This would value the all stock deal at about $2.95 billion.

The deal is expected to achieve cost synergies of about $260 million and increased long-term organic revenue growth for Fidelity.

An equity investment in Fidelity shares by affiliates of Thomas H. Lee Partners L.P. and Fidelity National Financial,l Inc (FNF) will result in about 16 million additional newly issued shares for aggregate proceeds of $250 million, subject to the terms and conditions set forth in the investment agreement. Upon closing, the combined entity would have about 374 million fully diluted shares outstanding.

Upon completion of the deal, private equity firm Warburg Pincus, currently holding 25% stake in Metavante, would be the largest single shareholder of the combined entity with about 11% ownership and would have representation on the board. Warburg Pincus has agreed to vote in favor of the transaction.

The combined entity would be served by Foley as chairman of the board and Fidelity's president and chief executive officer Kennedy as executive vice chairman of the board with responsibility for integrating the two companies. Further, chairman and chief executive officer of Metavante would serve as president and chief executive officer.

Other executive appointments include, current chief operating officer of fidelity Gary Norcross serving in the same position and current president and chief operating officer of Metavante Michael Hayford serving as chief financial officer. Additionally, current chief financial officer of Fidelity George Scanlon would serve as executive vice president of finance. Further, the board of directors of the combined entity would have six Fidelity board members and three Metavante board members.

The transaction, which is subject to approval by shareholders of both companies, also requires regulatory approvals and satisfaction of customary closing conditions. The requisite Metavante lenders have agreed to waive their change of control provisions and permit the merger to proceed. The transaction is anticipated to close in the third quarter fiscal 2009, and is expected to be accretive to adjusted earnings per share in fiscal 2010.

Following the acquisition, the combined entity is projected to carry about $3.8 billion of debt outstanding, including $1.45 billion of debt to be incurred and assumed in connection with the acquisition.

For the deal, Fidelity National is advised by Banc of America Securities LLC, Goldman Sachs & Co. (GS), while law firm Wachtell, Lipton, Rosen & Katz provided legal counsel. Metavante is advised by Barclays Capital, while law firms Kirkland & Ellis and Quarles & Brady provided legal counsel.

Fidelity added that it would update its outlook for fiscal 2009 following the completion of the deal in order to reflect the acquisition.

In Wednesday's regular trading session, FIS is currently trading at $17.45, down $0.75 or 4.12% on a volume of 9.10 million shares. In the past 52-week period, the stock has been trading in a broad range of $11.15 to $42.16.

MV is currently trading at $22.50, up $2.54 or 12.73% on a volume of 5.63 million shares. In the past 52-week period, the stock has been trading in a range of $11.50 to $26.50.

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