Fidelity National Information Services, known as FIS, said it’s undertaking a “comprehensive” review of operations, alongside installing a new CEO earlier than expected, after discussions with two investment firm shareholders.

FIS “initiated a comprehensive assessment of the Company’s strategy, businesses, operations and structure with the goal of positioning the Company to drive stronger results, increase shareholder value and enhance client services,” the company said in a press release Thursday.

FIS acknowledged that the review comes as the company has entered conversations with the hedge fund D.E. Shaw and JANA Partners, both of which have acted as activist investors in the past, pushing companies to take certain actions. In a lengthy Dec. 14 agreement with D.E. Shaw that FIS included in a filing with the Securities and Exchange Commission on Thursday, the company agreed to place a new director on its board.

Shares of FIS have declined about 39% over the past year. The company didn’t disclose the ownership stakes held by the two shareholders.

That new director, Mark Ernst, was formerly chief operating officer at FIS rival Fiserv from 2011 to 2018, according to his LinkedIn profile. The plan to appoint him to the board by Dec. 19, according to the agreement, may have played a role in the company’s announcement yesterday that FIS was promoting Stephanie Ferris sooner than expected to CEO, and nixing a former plan to keep ex-CEO Gary Norcross on as executive chairman next year. 

“The addition of Mark to the Board along with the Board’s commitment to optimize FIS’ business structure, strategy and operations position the Company well to generate significant value for all shareholders,” D.E. Shaw Managing Director Michael O’Mary said in the release. “We are confident in Stephanie’s leadership as FIS enters its next phase of growth and look forward to continuing our collaborative work with the Company.”

The FIS review of operations is in addition to an earlier “transformation” plan that FIS has said was aimed at cutting $500 million in costs. As part of that plan, FIS was reportedly readying to potentially cut thousands of jobs.

FIS also signaled in the release related to the assessment that it’s open to selling off parts of its business with this statement: “The review will also evaluate FIS’ business structures and portfolio of assets to ensure optimal configuration and deliver the greatest results for FIS’ clients and shareholders.”

In speculation about that possibility, analysts at Baird Equity Research suggested this week that the company might consider a sale of some part of its merchant business. “We believe portfolio optimization could be an opportunity for FIS within the merchant segment,” analysts at that financial firm said in a Dec. 15 note to their investor clients.

Recently, FIS Chief Financial Officer Erik Hoag noted that there had been challenges in areas of the merchant business. The company has battled “choppier” demand in its sales to small- and mid-sized clients, Hoag said earlier this month. FIS has also experienced a softening in sales in its other major segment in selling services to banks.

“We are taking a hard look at every aspect of our company to define areas for change and develop specific action and improvement plans,” Ferris said in the release. “The Board and I are fully aligned in implementing this comprehensive review of our businesses. Our goal is to optimize FIS for performance and returns while improving the satisfaction of our clients and employees.”

FIS hasn’t set a timetable for completing the review of operations. However, in the agreement with D.E. Shaw, the activist investor and the company agreed not to disparage each other for a little over a year, until a month before the company’s annual shareholder meeting in 2024. That means a war of words could ensue then if sufficient changes at the company haven’t been made.

By Lynne Marek on Dec 16, 2022
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