Three big private equity firms have teamed up to bid for Fidelity National Information Services Inc , sources familiar with the situation said on Thursday, a deal that, if completed, would rank as the biggest leveraged buyout since the financial crisis hit.

Blackstone Group , Thomas H. Lee Partners and TPG Capital are in talks to buy the company, which provides payment processing and other banking services and has a market value of nearly $11 billion, sources familiar with the situation said.

THL and another private equity firm, Warburg Pincus, already hold significant stakes in Fidelity National.

If the deal gets done, it would provide striking evidence that big-money buyouts are returning after credit markets plunged into a deep freeze because of the economic downturn.

It would also be the latest sign that M&A is picking up for the payment processing industry, which has seen other firms go on the block such as a unit of Royal Bank of Scotland Group Plc and privately held North American Bancard Inc.

Leveraged buyouts can be lucrative for banks that finance the transactions, and they have been scrambling to be involved since rumors started to spread through the market a week or so ago that large deals were making a comeback.

Three banks, JPMorgan Chase & Co , Citigroup Inc and Bank of America Corp are leading the financing for the potential buyout, a source familiar with the situation said.

Based on deals done in similar sectors in the past few years, Fidelity shares could be valued in the ballpark of up to $36 on our current estimate, said Robert W Baird analyst David Koning.

Fidelity National's shares rose 10 percent to $28.68 after rising as much as 18 percent.

Fidelity National's valuation prior to news that it was a takeover target was relatively low and the company was generating strong free cash flow with a high level of recurring revenue, said Duncan Williams & Co analyst Greg Smith.

Transaction processing companies like (Fidelity National) have long been sought after by private equity firms, Smith said. It's the type of company that fits the LBO mold quite well.

Fidelity National, which traces its history to the 1960s, is a former subsidiary of Fidelity National Financial and was spun off into a separate company in 2006. Last year it struck a $2.94 billion deal to buy Metavante Technologies.

Fidelity National, the banks and the private equity firms declined to comment.


The news marks a turnaround for a market that has not seen large deals since the end of the buyout boom when there were LBOs such as Blackstone's $26 billion deal to buy Hilton hotels and Kohlberg Kravis Roberts' $26 billion deal to buy payment processor First Data Corp.

Large leveraged buyouts have been pretty much extinct since the summer of 2007, when the financial crisis halted most financing for big deals, banks were stuck with debt and the economy froze.

Since then, the economy and stock markets have begun to recover, and confidence is returning to the banking sector. Bankers and private equity firms have started viewing mega-buyouts of $10 billion or more as achievable -- something that was not even on the radar just six months ago.

Blackstone's shares sank nearly 5 percent to $12.61 in a day where the stock markets slid.

The Wall Street Journal first reported news of Blackstone's interest in Fidelity National.

(Additional reporting by Paritosh Bansal in New York and Anurag Kotoky and Sweta Singh in Bangalore)

(Reporting by Megan Davies. Editing by Maureen Bavdek, Gunna Dickson and Robert MacMillan)