Fifth Third Bancorp and Advent International have signed a definitive agreement whereby Advent International will acquire a 51 per cent interest in Fifth Third’s processing business thr
Fifth Third Bancorp and Advent International have signed a definitive agreement whereby Advent International will acquire a 51 per cent interest in Fifth Third’s processing business through the establishment of a joint venture.
It values the new company at approximately USD2.35bn before valuation adjustments by either party.
Fifth Third will retain the remaining 49 per cent interest in the new company, Fifth Third Processing Solutions.
Pursuant to the agreement, Fifth Third Bank, an indirect wholly owned subsidiary of Fifth Third Bancorp, will contribute the assets and operations of Fifth Third’s merchant acquiring and financial institutions processing businesses to a new limited liability company.
The new company’s capitalization prior to the purchase of this interest will include senior secured notes payable to subsidiaries of Fifth Third in the amount of USD1.25bn.
Advent will pay Fifth Third USD561m in cash for a 51 per cent ownership interest in the equity of the LLC and for certain put rights. Additionally, Fifth Third will receive warrants in the new company exercisable in certain circumstances. Fifth Third will retain its credit card issuing business, including retail credit card and commercial multi-card services.
"Advent has a long and impressive record of investing in and growing payment processing companies to achieve exceptional results, and we believe that its investment will significantly enhance the ability of our processing business to generate even stronger results in the future," says Kevin T. Kabat, chairman, president and chief executive of Fifth Third Bancorp (pictured).
"Partnering with Advent will provide the processing business with access to additional capital and resources that we believe will create significant new opportunities and incremental growth in that business. At the same time, our ability to offer the best-in-class capabilities of Fifth Third Processing Solutions to our banking customers will continue to be a key entry point for us in creating new relationships and in expanding existing relationships."
"We are excited to enter into this partnership with Fifth Third," adds David Mussafer, managing partner of Advent. "We have long viewed Fifth Third Processing Solutions as the premier processor for merchants and financial institutions in the US, and we look forward to working with Fifth Third and the management team of the processing business to continue the impressive growth of the business. We are excited about opportunities to make further investments in this business, and we expect to leverage our international infrastructure and work with Fifth Third Processing Solutions to expand outside the US."
Charles Drucker, president of Fifth Third Processing Solutions, will be chief executive of the new joint venture company.
The transaction is expected to contribute significantly to Fifth Third’s retained earnings, capital levels and capital ratios, generating an expected pre-tax book gain of an estimated USD1.7bn and increasing Fifth Third’s tangible common equity and Tier 1 capital by an estimated USD1.2bn.
