On Thursday, Fidelity National Information Services (FIS) revealed plans to undertake a strategic review and implement board changes in response to pressure from hedge fund D.E. Shaw Group. The move comes as FIS faces challenges and investor frustration, leading to a drop in its stock price in recent years.
As part of the changes, Stephanie Ferris, originally scheduled to become CEO in January, will now take over the top job on Friday. Gary Norcross, who has served as CEO since 2015 and is a 34-year veteran of FIS, will be stepping down from the company. Additionally, Mark Ernst, formerly the executive vice president and chief operating officer at Fiserv, a global fintech and payments company that competes with FIS, will be joining FIS’s board.
The news initially led to a 3.5% increase in FIS’s premarket trading, but the stock fell after the market opened, trading at $71.20, possibly influenced by the broader market decline.
Stephanie Ferris expressed the company’s commitment to a thorough review of every aspect of the organization, aiming to identify areas for improvement and implement action plans. The strategic review, led by Ferris and the board, will evaluate FIS’s business structures, portfolio of assets, and will prioritize cost-cutting and margin improvement initiatives.
Over the past years, FIS, a technology provider for banking and merchant payments, has faced criticism from investors regarding how its three main businesses were interconnected. As a result, the stock prices plummetted.
Previously, FIS had announced that Gary Norcross would transition to the role of executive chairman in 2023. However, the recent developments led to a change in plans, and Jeffrey Goldstein, the current lead independent director, was appointed as independent chairman.
The changes were prompted by discussions with D.E. Shaw, a hedge fund that owns an unspecified stake in FIS, valuing the company at $43 billion. FIS’s share price has fallen by 32% in the past 52 weeks, closing at $72.41 on Wednesday.
D.E. Shaw, which manages $60 billion in assets, occasionally advocates for changes in companies in which it invests. The hedge fund urged FIS to reevaluate its business configuration and structure, considering the significant valuation discount compared to its peers. They also sought changes in the board and a faster pace of change in the executive suite.
Another activist investment firm, Jana Partners, had also invested in FIS and recently approached the company to advocate for a strategic review, which could potentially lead to the company being broken up, and immediate changes in the C-suite.
Interestingly, D.E. Shaw and Jana Partners were unaware of each other’s plans or proposals, highlighting the distinct nature of their campaigns.
D.E. Shaw is known for conducting discussions with corporate boards discreetly, often choosing to surface publicly after agreements have been reached. Earlier this year, the hedge fund reached an agreement with parcel delivery firm FedEx, adding two directors and gaining a say in appointing a third one.
In the past, D.E. Shaw has successfully influenced companies like Verisk Analytics to become a pure play insurance data business, leading to the sale of its energy-consulting arm, Wood Mackenzie. On the other hand, Jana Partners has frequently taken a more public approach in its campaigns.
As FIS embarks on its strategic review and implements changes, the outcome will be closely watched by investors and industry observers alike, as the company charts its course amidst the evolving financial landscape.
