UPDATE 2-Fidelity National buyout talks fail; to buy back shares

* To pursue recapitalization, share buyback

* Valuation was low relative to prior deals: analyst

* Shares fall as much as 7 pct
(Adds analyst comment; updates stock activity)

By Anurag Kotoky

BANGALORE, May 18 (BestGrowthStock) – Fidelity National Information
Services Inc (FIS.N: ) confirmed that talks regarding the sale of
the company have ended, and the payment processor plans to
borrow heavily to buy back shares.

Blackstone Group LP (BX.N: ), TPG Capital LP [TPG.UL] and
Thomas H. Lee Partners [THL.UL] had dropped their joint bid for
Fidelity on Monday because of disagreement over price, sources
said. [ID:nN17108594]

The private-equity groups were offering Fidelity $32 a
share, the sources said.

“It is ($32) lower than what previous core-processing
takeouts have gone for,” Robert W. Baird analyst David Koning
said.

“When Metavante got acquired, they ended up going for 9.5
times their forward EBITDA, which would have put this stock at
more than mid-30s range,” he said.

Fidelity National had last year bought rival Metavante
Technologies for $2.94 billion.

A leveraged recapitalization, that Fidelity now plans,
typically sees a company borrowing substantial sums to pay a
dividend to shareholders or to buy its own shares. Such a
process raises shareholder return without an outright sale,
although it does come with a lot of risk.

Analyst Koning said the company can easily handle an extra
$1.5 billion to $2 billion in debt, given its strong free cash
flow, stable revenue streams and recurring revenue.

Private-equity firms are interested in such companies as
they have solid cash flows and a strong business model to
handle heavy debt, he said.

Fidelity shares dropped as much as 7 percent to $26.80
Tuesday morning on the New York Stock Exchange.

The shares, which have rallied since talks of a buyout
first surfaced, have recovered significantly since hitting a
52-week low of $18.25 a year back.
(Reporting by Anurag Kotoky in Bangalore; Editing by Ratul Ray
Chaudhuri and Vinu Pilakkott)

UPDATE 2-Fidelity National buyout talks fail; to buy back shares