A consortium bidding for Fidelity National Information Services Inc. has pulled out because of disagreement over price, derailing what would have been the biggest buyout since the credit crisis, three sources familiar with the situation said.
A leveraged buyout for payment processing firm Fidelity could have been worth around $15 billion and had been seen as heralding the return of mega-buyouts after a three year drought.
Blackstone Group LP, TPG Capital LP and Thomas H. Lee Partners were in talks to buy the company, valued at around $11 billion with $3 billion of debt, for about $32 a share, sources said.
That would have been a more than 20 percent premium to Fidelity's stock price prior to news of the deal leaking out.
But Fidelity's board wanted a substantial increase in the price that the consortium was not prepared to meet, the sources said. The exact price the board wanted was not specified.
Fidelity's shares fell about 7 percent to $26 in afterhours trading.
Buyout deals of any significant size have been few and far between since the credit bubble burst, starving private equity firms of easy financing for LBOs.
Financing had been in place for a potential Fidelity deal, sources said, and a number of banks including JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. had been lined up.
The banks collectively were to provide about $10 billion debt, one of the sources said.
Still, any hike in the price would have had to come from additional equity the private equity firms would have to put in the deal rather than extra bank debt, that source said. The equity component already stood at about $5 billion, the source said.
The collapse of the deal illustrates that while banks are willing to lend, private equity firms are cautious about price and some would rather walk away from a deal than risk getting in deep water by overpaying. It also shows that some financing restraints remain.
The potential deal had involved a large number of private equity firms and harked back to the 'club deals' seen in 2006-7 when private equity firms were joining up to bid on larger and larger assets.
One potential stumbling block had been identified a week ago. Warburg Pincus, a significant shareholder in Fidelity with about an 11 percent stake and a board seat, was opposed to the potential deal, two sources said. Warburg declined comment.
Another loose end that needed tying up was that Silver Lake was considering joining the consortium bidding for Fidelity, sources said.
If Warburg had voted against a transaction that could not alone have derailed a deal, even though the private equity firm had a board seat.
Warburg's investment traces back to 2007 when it invested $625 million for a 25 percent equity stake in payment technology firm Metavante. In October 2009, Metavante was sold to Fidelity National for $2.94 billion and Warburg retained a stake in the new company.
THL Managing Director Thomas Hagerty is also on Fidelity's board, although he was not on the special committee evaluating the deal.
THL and TPG Capital became shareholders in 2004, buying a 25 percent stake in the company between them. TPG later sold its stake but THL owns 4 percent, according to Reuters data.
The decision by the consortium came just hours after Fidelity for the first time acknowledged it was considering an LBO deal.
Fidelity said in a statement earlier on Monday that its board, through a special committee advised by Goldman Sachs , was evaluating strategic alternatives.
Those included a potential leveraged buyout opportunity that was proposed or a leveraged recapitalization with a share repurchase, it said.
A leveraged recap typically sees a company leverages itself up in order to pay a dividend to shareholders or to buy its own shares.
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