Business Context and Reporting Period
This Form 8-K, dated September 14, 2005, reports that Certegy Inc. has entered into a definitive merger agreement with Fidelity National Information Services, Inc. (FIS). Under the agreement, FIS will merge into a Certegy subsidiary, and Certegy will change its name to Fidelity National Information Services, Inc. The transaction is structured as a tax-free reorganization.
Key Financial Metrics and Transaction Terms
- Exchange Ratio: Each share of FIS common stock will be converted into 0.6396 shares of Certegy common stock.
- Ownership Structure: Post-merger, FIS stockholders (led by Fidelity National Financial, Inc. or FNF) will own approximately 67.5% of the combined company on a fully-diluted basis, with FNF owning approximately 50.3%.
- Special Dividend: Certegy will declare and pay a special dividend of $3.75 per share to existing Certegy shareholders prior to the merger.
- Equity Issuance: Approximately 132 million shares of Certegy stock will be issued to FIS stockholders in a private placement exempt from registration.
- Termination Fees: Certegy may be required to pay FIS transaction expenses up to $10 million or a termination fee of $65 million under specified circumstances.
Material Changes and Governance
The filing details significant changes to corporate governance and executive compensation:
- Board Composition: The post-merger board will consist of 10 directors: four designated by the existing Certegy board, four by FNF, and two by FIS minority stockholders.
- Leadership: William P. Foley, II (Chairman/CEO of FNF) will become Chairman of the combined company. Lee A. Kennedy will remain as CEO and a director.
- Executive Compensation: New employment agreements were executed for CEO Lee A. Kennedy and CFO Jeffrey S. Carbiener. Kennedy will receive a $6.25 million cash payment upon closing (replacing prior change-in-control agreements), a $750,000 base salary, and a target bonus of 200% of base salary. Carbiener will receive a $500,000 cash payment, a $400,000 base salary, and a 200% target bonus.
- Anti-Takeover Rights: Certegy amended its Rights Agreement to exempt the merger from triggering its poison pill provisions.
Guidance, Risks, and Conditions
The filing does not provide financial guidance, revenue projections, or liquidity metrics for the combined entity. The consummation of the merger is subject to several material conditions:
- Approval by Certegy shareholders.
- Expiration or termination of the Hart-Scott-Rodino waiting period.
- Absence of any injunction or order prohibiting the closing.
- Accuracy of representations and warranties and material compliance with covenants by both parties.
- Delivery of legal opinions confirming the transaction qualifies as a tax-free reorganization.
Investor Verification Checklist
- Verify the final approval status of the merger by Certegy shareholders.
- Confirm the regulatory clearance status regarding the Hart-Scott-Rodino Act.
- Review the full text of the Merger Agreement (Exhibit 2.1) for specific termination rights and fee triggers.
- Assess the impact of the $3.75 special dividend on Certegy's immediate cash position.
- Monitor the integration of FIS's operations and the retention of key management under the new employment agreements.