UPDATE 1-Fidelity National shares up on buyback plan

* To repurchase shares at $29-$31/shr

* Offer gives a premium of at least 9 pct to Tuesday close

* Seeks incremental debt of $2.5 bln

* Seeks to amend, refinance existing credit pacts
(Adds details throughout, updates stock activity)

May 26 (BestGrowthStock) – Shares of Fidelity National Information
Services (FIS.N: ) rose as much as 6 percent Wednesday, a day
after the payment processor revealed plans to buy back as much
as $2.5 billion shares, as the company initiates a leveraged
recapitalization.

With the buyback, the company will boost its debt relative
to its equity, which will increase its return on equity, a
measure of profitability.

The buyback follows failed talks between Fidelity National
and a consortium of private equity firms last week after
disagreements over price.

“This puts a floor under the stock and is a smart way for
management to bring back the value LBO (leveraged buyout)
discussions created recently,” JP Morgan said in a note.

The company said late on Tuesday it will repurchase shares
at a price range of between $29 and $31 per share, which
represents a premium of at least 9 percent to the stock’s
Tuesday close.

Under the offer, the company’s shareholders may tender all
or a portion of their common shares within the price range set
by the company. The company hopes to repurchase the shares
within eight to 10 weeks.

But in doing so, the payment processing firm is taking a
risk that it can create more value from leveraging itself than
from being taken over.

“At the midpoint of the range, we estimate that the deal
would reduce the share count by 83 million shares, increase
interest expense by $125 million to $150 million and be about
20 cents to 25 cents a share accretive to fiscal 2011
earnings,” analyst David Parker of Lazard Capital wrote in a
note.

The company, which has corporate debt of about $3 billion,
will now seek an incremental debt of $2.5 billion in the form
of term loans and long-term bonds. It will also restructure its
current credit facilities.

Analyst Parker said he is comfortable that Fidelity can
continue to operate with this debt level, and sees the return
of capital as positive and timely, given the currently low cost
of debt.

Shares of the company were up 4 percent at $27.69 Wednesday
afternoon on the New York Stock Exchange, after touching a high
of $28.23 earlier in the day.

Stock Market Analysis

(Reporting by Abhinav Sharma in Bangalore; Editing by Roshni
Menon)

UPDATE 1-Fidelity National shares up on buyback plan