Dive Brief:
- Fidelity National Information Services, known as FIS, appointed two new directors to its board, Mark Benjamin and Lee Adrean, following the resignation of one board member, Mark Ernst, who served for only a few weeks, according to a company filing with the Securities and Exchange Commission.
- Ernst exited on Jan. 13 after a “a former employer of his asserted to Mr. Ernst that his service on the Board would violate certain non-competition agreements,” the filing said. Ernst, who joined the board last month, was formerly chief operating officer at FIS rival Fiserv from 2011 to 2018, according to his LinkedIn profile.
- Benjamin, and Ernst before him, were appointed to the FIS board as part of the company’s cooperation agreement signed last month with a new activist investor, the hedge fund D.E. Shaw.
Dive Insight:
Director upheaval on the FIS board follows the investments of D.E. Shaw and another activist investor, JANA Partners, last year.
Both of the new investors have in the past pushed companies to take certain actions. In a lengthy Dec. 14 agreement with D.E. Shaw that FIS included in a prior SEC filing, it’s clear that D.E. Shaw plans to play an active role at the company that has been struggling to boost shareholder value.
FIS has been under pressure to consider selling parts of its business, maybe even its entire merchant business. “I am seeing some increasing investor demand for the merchant business to be spun out of FIS,” UBS Analyst Rayna Kumar said in a recent interview. Bank of America analysts echoed those sentiments.
“FIS could potentially unlock material shareholder value through portfolio re-shaping efforts, most notable by spinning off the Merchant segment, which continues to be FIS’ most controversial business,” the Bank of America analysts said in an investor note last month. “Unless or until an activist becomes involved, any significant re-shaping seems unlikely.”
An analyst report this week from Baird Equity Research pointed to “rumors FIS may have attracted interest from a strategic buyer looking to buy all of the company,” citing a blog report. The Baird analysts distanced themselves from endorsing the credibility of the report, but speculated that a sale could lead to a break-up of the company.
In conjunction with the disclosure of the new investors last month, FIS said it would pursue “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.”
A spokesperson for FIS declined to comment on that speculation, or to provide any additional comment about the board changes, including whether Adrean’s addition will result in an expansion of the board.
That was in addition to a $500 million cost-cutting plan that it had already undertaken in November after the company’s then-CEO Gary Norcross and President Stephanie Ferris expressed disappointment with third-quarter financial results.
Shortly thereafter, as the presence of the activist investors was disclosed, Norcross accelerated his departure as CEO and agreed not to remain on the board, handing the CEO post to Ferris last month, earlier than expected. After the exit of Norcross, Jeffrey A. Goldstein, the board’s lead independent director, became chairman. Ferris joined the board last October.
“We are confident Lee and Mark have the right skills and expertise to help the Board guide and oversee management as we work to enhance shareholder value,” Goldstein said in a press release Friday regarding the new appointments.
Benjamin is the CEO of the software company Nuance Communications and was formerly president and chief operating officer of NCR Corp. while Adrean was formerly chief financial officer of credit rating bureau Equifax and also held that role formerly at NDC Health, according to the release.
