FIS to Acquire SunGard in $9 billion Deal

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Sungard

Fidelity National Information Services (FIS) agreed in principle yesterday to acquire Wayne-based SunGard for approximately $9.2 billion in cash and stock. SunGard’s future has been the source of much recent speculation as the company had already filed for an IPO earlier this year. However, it turns out that it was looking at all options and the deal with FIS is just too good to resist.

The $9 billion milestone deal will include Jacksonville, Florida, based FIS taking over around $4.67 billion of SunGard’s long term debt and paying cash for a hundred percent of the equity valuing the financial software company at just under $5 billion.

SunGard was founded in 1982 as a spin-off of the computer services division of Sun Oil Co. and has grown rapidly since then by acquiring over 150 similar companies over the last twenty years pushing it, at one point, into the Fortune 1000 list of companies.  

SunGard was bought out in 2005 by a group of seven private equity firms led by Silver Lake that paid around $11.53 billion to acquire SunGard. At the time of the deal, it was the biggest innovation privatization ever.

While the deal does not sound very profitable for the equity firms, in fact it will represent a total of around 1.66x cash on cash return, as they have made profits on various SunGard related transactions since purchasing it.

This includes the reorganization of SunGard, such as its Higher Education Unit which was sold off for $1.78 billion, and the Disaster Recovery Unit which was spun off and is still held by the private equity consortium. Add to that over $700 million in dividends paid out by SunGard to the equity firm consortium and it starts to make more financial sense, as the deal represents a cash return of $5.8 billion on a cash investment of $3.5 billion.

“Our focus has always been on delivering more value to our clients and making decisions that achieve our growth and performance objectives,” SunGard president and chief executive officer Russ Fradin said in a statement. “We are proud to become part of one of the financial services industry’s most respected and solidly performing companies.”

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