UPDATE 3-Blackstone consortium drops Fidelity Nat bid-sources

* Fidelity’s board wanted large increase in price – sources

* Consortium wasn’t prepared to meet that – sources

* Deal would have been biggest LBO since credit crunch

* Shareholder Warburg had opposed deal – sources

* Banks were lined up to provide about $10 bln
debt-sources
(Recasts lead with extra sources, adds details about buyouts,
premium, Silver Lake, board)

By Megan Davies

NEW YORK, May 17 (BestGrowthStock) – A consortium bidding for
Fidelity National Information Services Inc (FIS.N: ) on Monday
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 (BX.N: ), TPG Capital LP [TPG.UL] 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 after
hours 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 (JPM.N: ), Citigroup Inc (C.N: ) and Bank of America Corp
(BAC.N: ) 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.

BOARD CONSTRUCTION

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
(GS.N: ), 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.

Investing Basics

(Editing by Andre Grenon, Carol Bishopric and Lincoln Feast)

UPDATE 3-Blackstone consortium drops Fidelity Nat bid-sources