MAY 6, 2010, 5:11 P.M. ET.

Blackstone in Talks to Acquire Fidelity National

By PETER LATTMAN And ANUPREETA DAS

A group of private-equity firms led by Blackstone Group LP are in talks to acquire financial-data-processing company Fidelity National Information Services Inc., according to people familiar with the situation.

A deal for Fidelity National, which has a market capitalization exceeding $10 billion, would be the largest leveraged buyout since the credit crisis struck nearly three years ago. Other buyout shops teaming up with Blackstone on the deal talks include TPG and Thomas H. Lee Partners LP, according to people familiar with the matter. A Fidelity National spokeswoman declined to comment.

Pricing details for a transaction, which is at a sensitive stage and still may fall apart, couldn't be determined Thursday. But shares of the company surged 19% after The Wall Street Journal disclosed the talks Thursday before selling off along with the market drop. In 4 p.m. New York Stock Exchange composite trading, the shares rose $2.68, or 10%, to $28.68, giving the company a $10.69 billion market capitalization. Fidelity National also carries about $3 billion in debt.

.One worry for buyers is the fragile state of the stock and bond markets. The stock-market plunge Thursday has brought a fear that the credit markets could soon close, especially if conditions in Europe continue to deteriorate. That is why people involved in the transaction said there is a sense of urgency to get it done in the next week or so.

Fidelity National, of Jacksonville, Fla., isn't well known, but it is one of the largest U.S. companies providing technology services to the banking industry. It helps banks process credit-card transactions, service auto loans, and handle back-office functions for money managers.

Six banks are arranging the financing for the buyout: Bank of America Corp.; Citigroup Inc.; Deutsche Bank AG; Barclays Capital, a unit of Barclays PLC; J.P. Morgan Chase & Co.; and Credit Suisse Group, people familiar with the matter said.

The financing package and terms for the Fidelity National buyout still are being worked out, but two people familiar with the transaction said that participating banks probably would feel comfortable handling between $1 billion and $2 billion each. Also, this deal is likely to be financed by a fairly high amount of equity, potentially even 30%, one of the people said.

In turmoil just a year ago, the private-equity industry has managed to recover this year amid broader credit- and stock-market rallies. Banks, which provide funding for buyout transactions, also have reopened their spigots. Tuesday, buyout shops Warburg Pincus LLC and Silver Lake Partners agreed to pay $3.4 billion to acquire Interactive Data Corp., a financial-data provider.

Fueling the recovery in leveraged buyouts is pent-up demand by private-equity firms, which couldn't do deal for two years due to the financial crisis. Buyout shops have roughly $445 billion in uninvested capital, according to research from Cambridge Associates. Several of the largest firms, TPG, Bain Capital LLC and Apollo Global Management LLC, are sitting on billions of dollars in cash from record-sized funds raised just before the markets turned down.

Blackstone has been wooing William P. Foley II, the company's chairman and chief executive, for some time, according to people familiar with the talks. Trained as a lawyer, the 62-year-old Mr. Foley is a longtime deal maker. In 2005, he was part of a failed buyout bid to acquire Callaway Golf Co., and in 1994 was part of a group that gained control of CKE Restaurants Inc., which operates the Hardee's and Carl's Jr. chains.

Private-equity firms have interest in payment-processing businesses, whose high level of recurring revenue and strong cash flows support the debt that they use to acquire these companies. Companies like Fidelity National, which earned $154 million on $1.3 billion of revenue in the first quarter, have benefited from the U.S. financial-services industry's trend toward outsourcing back-office tasks.

The company's largest shareholder is Warburg Pincus, which acquired its stake via Fidelity National's 2009 acquisition of Metavante Technologies Inc. The transaction made Warburg Pincus, which owned 25% of Metavante, the largest shareholder of Fidelity National, with a more than 10% stake.

Warburg Pincus is a key player in the Blackstone discussions, said people familiar with the talks. A Warburg Pincus spokeswoman declined to comment.

TPG and Thomas H. Lee Partners already have involvement in the company. In 2004, the two firms paid $500 million for a 25% stake in Fidelity National after failing to buy the entire company. TPG has since exited that investment, but Thomas H. Lee still owns 4.4% of the company's shares.

Last year, buyout shop Advent International Corp. acquired Fifth Third Bancorp's payment-processing unit and spun it off into a separate business. And in one of the largest leveraged buyouts ever completed, Kohlberg Kravis Roberts & Co. acquired credit-card processor First Data Corp. for $26.3 billion in 2007.

Blackstone, the New York firm run by Stephen Schwarzman, has long hankered to buy a transaction processor. It signed a deal to buy Alliance Data Systems Corp. in 2007, but that deal collapsed. It also bid for First Data.

—Gina Chon
contributed to this article.
Write to Peter Lattman at peter.lattman@wsj.com

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