sv4za
As filed with the Securities and Exchange Commission on
September 18, 2006.
Registration
No. 333-135845
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
AMENDMENT NO. 1
TO
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
FIDELITY NATIONAL INFORMATION
SERVICES, INC.
(Exact name of Registrant as
specified in its Charter)
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Georgia
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7389
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58-2606325
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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601 Riverside Avenue
Jacksonville, Florida
32204
(904) 854-8100
(Address, including zip code,
and telephone number, including area code, of Registrants
principal executive offices)
Jeffrey S. Carbiener
Executive Vice President and
Chief Financial Officer
601 Riverside Avenue
Jacksonville, Florida
32204
(904) 854-8100
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
With a copy to:
Robert S.
Rachofsky, Esq.
Gary D. Boss, Esq.
LeBoeuf, Lamb, Greene &
MacRae LLP
125 West
55th Street
New York, NY 10019
(212) 424-8000
Approximate date of commencement of proposed sale to
public: As soon as practicable following the
effective date of this Registration Statement and the date on
which all other conditions to the merger described herein have
been satisfied or waived.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION
FEE
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount to be
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Offering Price
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Aggregate
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Registration
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Securities to be Registered
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Registered(1)
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per Share
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Offering Price(2)
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Fee(3)
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Common Stock, par value
$.01 per share
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96,624,336
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Not Applicable
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$3,295,914,450
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$352,663
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(1)
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Represents the maximum number of
shares that may be issued by the registrant to holders of
Fidelity National Financial, Inc. common stock, par value
$0.0001 per share, in connection with the merger described
in this proxy statement/prospectus.
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(2)
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Estimated solely for the purpose of
calculating the registration fee in accordance with
Rule 457(f).
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(3)
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Of this registration fee, $351,058
has been previously paid and $1,605 is being paid herewith.
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(4)
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The registration fee is calculated
pursuant to Rule 457(f) by multiplying the proposed maximum
aggregate offering price for all securities to be registered by
0.000107.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
TO THE
SHAREHOLDERS OF FIDELITY NATIONAL INFORMATION SERVICES, INC. AND
THE
STOCKHOLDERS OF FIDELITY
NATIONAL FINANCIAL, INC.
The boards of directors of Fidelity National Information
Services, Inc., which we refer to as FIS, and Fidelity National
Financial, Inc., which we refer to as FNF, have each unanimously
approved a business combination of the two companies. FIS and
FNF have entered into an agreement and plan of merger, dated as
of June 25, 2006, as amended and restated as of
September 18, 2006, whereby FNF would merge into FIS. We
refer to the agreement and plan of merger, dated as of
June 25, 2006 (prior to its amendment and restatement) as
the original merger agreement and the agreement and plan of
merger as amended and restated as of September 18, 2006 as
the merger agreement. The merger agreement contemplates that the
merger will be consummated approximately two weeks after the
completion of the transactions contemplated under a securities
exchange and distribution agreement, which we refer to as the
distribution agreement, dated as of June 25, 2006, as
amended and restated as of September 18, 2006, between FNF
and Fidelity National Title Group, Inc., which we refer to
as FNT. We refer to the securities exchange and distribution
agreement dated as of June 25, 2006 (prior to its amendment
and restatement) as the original distribution agreement. The
distribution agreement, which was entered into at the same time
as the merger agreement, provides for the contribution of
substantially all of FNFs assets and liabilities other
than its ownership interest in FIS to FNT in exchange for shares
of FNTs Class A common stock and the conversion of
shares of FNTs Class B common stock held by FNF into
FNTs Class A common stock, followed immediately by
the distribution by FNF to its stockholders of all FNT shares
then held by FNF. We refer to this distribution of the FNT
shares as the spin-off. Shortly after the spin-off, FNF Capital
Leasing, Inc., which we refer to as FNF Leasing, will merge with
and into a newly formed wholly owned subsidiary of FIS, which we
refer to as the Leasing merger. Immediately prior to the merger,
FNFs only asset would be its equity ownership in FIS.
If the merger is completed, FNF stockholders will have the right
to receive a number of shares of FIS common stock, par value
$0.01 per share, in exchange for each share of FNF common
stock, par value $0.0001 per share, that they hold equal to
96,521,877 (subject to increase under certain circumstances as
described herein) divided by the number of FNF shares
outstanding immediately prior to the effective time of the
merger. On the date of this proxy statement/prospectus, FNF and
its subsidiaries own approximately 51.3% of the issued and
outstanding shares of FIS common stock. Based upon the
outstanding shares of FNF common stock on August 31, 2006,
FIS would be obligated to issue 0.547 shares of FIS common
stock in the merger for each outstanding FNF share (assuming the
number of outstanding shares of FNF common stock was the same
immediately prior to the effective time of the merger),
representing in the aggregate approximately 50.6% of the issued
and outstanding FIS common stock after the merger.
This proxy statement/prospectus is being furnished to the
stockholders of FNF in connection with the solicitation of
proxies by the board of directors of FNF for use at the FNF
Annual Meeting of stockholders to be held on October 23,
2006, and any adjournment or postponement thereof. At the FNF
Annual Meeting, stockholders will be asked to consider and vote
upon a proposal seeking adoption of the merger agreement as well
as other proposals related to the business of FNF. All of these
proposals are discussed in greater detail in this proxy
statement/prospectus.
This proxy statement/prospectus also constitutes an information
statement of FIS being furnished to FIS shareholders in
connection with the FIS Annual Meeting of shareholders to be
held on October 23, 2006, and any adjournment or
postponement thereof. Because of FNFs controlling
interest in FIS, the board of directors of FIS is not soliciting
proxies from FIS shareholders with respect to the FIS Annual
Meeting. At the FIS Annual Meeting, FIS shareholders
will be voting on (i) the issuance of shares of FIS common
stock in the merger, (ii) the amendment and restatement of
the Amended and Restated Certegy Inc. Stock Incentive Plan to
increase the total number of shares available and (iii) the
other annual meeting items identified below. All of these
proposals are discussed in greater detail in this proxy
statement/prospectus. Subject to the approval of the
merger by its stockholders at its annual meeting, FNF intends to
vote the FIS shares that it owns and that represent FNFs
controlling interest in FIS at the FIS Annual Meeting in favor
of all proposals, and accordingly the approval of these
proposals is virtually assured.
Upon the completion of the merger, FNF will cease to exist as a
separate entity. FISs current shareholders will continue
to own their existing shares, which will not be affected by the
merger, except as otherwise described in this proxy
statement/prospectus.
Shares of FIS common stock are listed on the New York Stock
Exchange, which we refer to as the NYSE, under the trading
symbol FIS. Upon completion of the merger, FNF
common stock, which is listed on the NYSE under the trading
symbol FNF, will be delisted. Once the FNF common
stock is delisted, FNT will apply to have its shares listed and
traded on the NYSE under the trading symbol FNF.
We cannot complete the merger unless the holders of FNF common
stock approve the merger and the holders of FIS common stock
approve the issuance of FIS common stock in connection with the
merger. If you are an FNF stockholder, whether or not you plan
to attend the FNF Annual Meeting, we request that you please
take the time to vote by following the instructions on your
proxy card(s).
We urge you to carefully read this proxy
statement/prospectus, and the documents incorporated by
reference into this proxy statement/prospectus. In particular,
see Risk Factors beginning on page 29.
We are excited about the benefits the proposed merger brings to
both FIS shareholders and FNF stockholders, and we thank you for
your consideration and continued support.
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Lee A. Kennedy
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William P. Foley, II
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President and Chief Executive
Officer
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Chairman of the Board and Chief
Executive Officer
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Fidelity National Information
Services, Inc.
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Fidelity National Financial, Inc.
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This proxy statement/prospectus also constitutes a prospectus of
FIS, filed with the United States Securities and Exchange
Commission, which we refer to as the SEC, as part of a
registration statement on
Form S-4
under the Securities Act of 1933, as amended, hereinafter
referred to as the Securities Act, with respect to the shares of
FIS common stock to be issued in the merger pursuant to the
merger agreement.
Neither the SEC nor any state securities commission has
approved or disapproved of the merger or the securities to be
issued in the merger, or passed upon the adequacy or accuracy of
this proxy statement/prospectus. Any representation to the
contrary is a criminal offense.
This proxy statement/prospectus is dated September 18,
2006, and is first being mailed to FIS shareholders and FNF
stockholders on or about September 22, 2006.
REFERENCES
TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business
and financial information about FIS and FNF from documents that
are not included in or delivered with this proxy
statement/prospectus. This information is available for you to
review at the SECs public reference room located at 100 F
Street, N.E., Room 1580, Washington, DC 20549, and through
the SECs website, www.sec.gov. You can also obtain those
documents incorporated by reference into this proxy
statement/prospectus, without charge, by requesting them in
writing or telephone or email from the appropriate company at
the following addresses and telephone numbers or obtaining them
from each companys website listed below:
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Fidelity National Information
Services, Inc.
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Fidelity National Financial,
Inc.
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601 Riverside Avenue
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601 Riverside Avenue
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Jacksonville, Florida 32204
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Jacksonville, Florida 32204
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Attention: Corporate Secretary
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Attention: Corporate Secretary
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(904)
854-8100
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(904) 854-8100
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www.fidelityinfoservices.com
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www.fnf.com
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Information contained on the FIS and FNF websites other than the
foregoing documents is expressly not incorporated by reference
into this proxy statement/prospectus.
You can also obtain documents incorporated by reference into
this proxy statement/prospectus by requesting them in writing or
by telephone from Morrow & Co., FNFs proxy
solicitor, at the following address and telephone number:
Morrow & Co.
470 West Avenue
Stamford, CT 06902
(800) 662-5200
If you would like to request documents, you must do so by
October 16, 2006, so that you may receive them before the
annual meetings.
See Where You Can Find More Information beginning on
page 1.
Fidelity
National Information Services, Inc.
601
Riverside Avenue
Jacksonville, Florida 32204
September 18, 2006
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
To
Be Held on October 23, 2006
To the
Shareholders of Fidelity National Information Services, Inc.:
The 2006 Annual Meeting of shareholders of Fidelity National
Information Services, Inc., which we refer to as FIS, will be
held on October 23, 2006, at 10:00 a.m., local time,
in the Peninsular Auditorium at 601 Riverside Avenue,
Jacksonville, Florida 32204. At the meeting, shareholders will
vote upon the following proposals:
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1.
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To consider and vote upon a proposal to approve the issuance of
shares of FIS common stock to the stockholders of Fidelity
National Financial, Inc., which we refer to as FNF, in
connection with the agreement and plan of merger, dated as of
June 25, 2006, as amended and restated as of
September 18, 2006, between FIS and FNF, which agreement
provides for the merger of FNF with and into FIS with FIS being
the surviving corporation;
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2.
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To consider and vote upon a proposal to approve the Amended and
Restated Certegy Inc. Stock Incentive Plan, which will, among
other things, increase the total number of shares of common
stock available for issuance under the plan by an additional
4,000,000 shares and increase the limits on the number of
individual awards that may be granted under the plan;
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3.
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To consider and vote upon a proposal to approve the FIS Employee
Stock Purchase Plan;
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To consider and vote upon a proposal to approve the FIS Annual
Incentive Plan;
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To consider and vote upon a proposal to elect four Class I
directors to serve until the 2009 FIS Annual Meeting of
shareholders;
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6.
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To consider and vote upon a proposal to ratify the appointment
of KPMG LLP as FISs independent registered public
accounting firm for its fiscal year ending December 31,
2006; and
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7.
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To transact such other business as may properly be brought
before the FIS Annual Meeting.
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The board of directors of FIS is not aware of any other business
to be presented for a vote at the FIS Annual Meeting.
In connection with the merger referenced in Proposal 1, FIS
will issue an aggregate of 96,521,877 (subject to increase under
certain circumstances as described in the proxy
statement/prospectus accompanying this notice) shares of its
common stock in exchange for the shares of FNF common stock
outstanding at the effective time of the merger. The terms and
provisions of the merger are more fully described in the
accompanying proxy statement/prospectus. A copy of the merger
agreement is attached to the proxy statement/prospectus as
Annex A. Under Georgia law, dissenters rights
will not be available to FIS shareholders in connection with the
merger.
The affirmative vote of the holders of a majority of the votes
cast at the FIS Annual Meeting is required to approve the
issuance of shares required under the merger agreement. On the
date of the proxy statement/prospectus FNF and its subsidiaries
owned 97,646,500 shares of FIS common stock, representing
approximately 51.3% of the issued and outstanding shares of FIS.
FNF intends to vote all of its FIS shares (and cause its
subsidiaries to vote all of their FIS shares) at the FIS Annual
Meeting with respect to all of the proposals listed above.
If FNF receives the requisite number of votes of its
stockholders at the FNF Annual Meeting in favor of adoption of
the merger agreement and approval of the merger, it intends to
vote its FIS shares FOR Proposal 1 relating to the issuance
of
shares of FIS common stock required under the merger
agreement at the FIS Annual Meeting. In that case, FNFs
vote of its FIS shares alone will suffice for approval by FIS
shareholders of the issuance of shares of FIS common stock under
the merger agreement. If FNF does not receive the
requisite vote of its stockholders for adoption of the merger
agreement and approval of the merger it will not vote its FIS
shares FOR Proposal 1, relating to the issuance
of FIS common stock under the merger agreement, at the FIS
Annual Meeting.
Irrespective of the vote on the issuance of shares of FIS common
stock pursuant to the merger agreement, FNF intends to vote all
of its FIS shares FOR Proposals 2 through 6.
All FIS shareholders are cordially invited to attend the FIS
Annual Meeting, although only those shareholders of record at
the close of business on September 11, 2006 will be
entitled to receive notice of, and to vote at, the FIS Annual
Meeting or any adjournment thereof. Approval of Proposal 1
relating to the issuance of shares of FIS common stock pursuant
to the merger agreement requires an affirmative vote of a
majority of the votes cast at the FIS Annual Meeting, approval
of Proposal 2 relating to the amendment of the Certegy Inc.
Stock Incentive Plan requires an affirmative vote of a majority
of the votes cast at the FIS Annual Meeting, approval of
Proposal 3 relating to approval of the FIS Employee Stock
Purchase Plan requires an affirmative vote of a majority of the
votes cast at the FIS Annual Meeting, approval of
Proposal 4 relating to the approval of the FIS Annual
Incentive Plan requires an affirmative vote of a majority of the
votes cast at the FIS Annual Meeting, approval of
Proposal 5 relating to the election of directors requires
an affirmative vote of a plurality of the votes cast at the FIS
Annual Meeting and approval of Proposal 6 relating to the
ratification of the appointment of KPMG LLP as FISs
independent auditors, as well as any other proposal that may be
properly presented at the FIS Annual Meeting, requires an
affirmative vote of a majority of the votes cast at the FIS
Annual Meeting. Your attention is directed to the proxy
statement/prospectus accompanying this notice for a more
complete statement regarding the matters proposed to be acted
upon at the meeting.
FISs board of directors has unanimously approved the
merger agreement, approved the transactions contemplated by the
merger agreement and determined that the merger is in the best
interests of FIS and its shareholders. FISs board of
directors recommends that you vote FOR proposal 1
relating to the issuance of FIS common stock pursuant to the
merger agreement and the other proposals described above.
ON ACCOUNT OF FNFS CONTROLLING INTEREST IN FIS, THE BOARD
OF DIRECTORS OF FIS IS NOT SOLICITING PROXIES FROM SHAREHOLDERS
OF FIS IN CONNECTION WITH THE PROPOSALS TO BE VOTED UPON AT
THE FIS ANNUAL MEETING. FIS SHAREHOLDERS ARE NEVERTHELESS
INVITED TO ATTEND AND VOTE AT THE FIS ANNUAL MEETING.
By Order of the Board of Directors
Todd C. Johnson
Secretary
September 18, 2006
Fidelity
National Financial, Inc.
601
Riverside Avenue
Jacksonville, Florida 32204
September 18, 2006
NOTICE
OF
ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on October 23, 2006
To the
Stockholders of Fidelity National Financial, Inc.:
The 2006 Annual Meeting of stockholders of Fidelity National
Financial, Inc., which we refer to as FNF, will be held on
October 23, 2006, at 9:00 a.m., local time, in the
Peninsular Auditorium at 601 Riverside Avenue,
Jacksonville, Florida 32204. At the meeting, stockholders will
vote upon the following proposals:
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1.
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To adopt the agreement and plan of merger, dated June 25,
2006, as amended and restated as of September 18, 2006, and
approve the merger of FNF with and into Fidelity National
Information Services, Inc., which we refer to as FIS, with FIS
being the surviving corporation.
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2.
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To elect two directors to serve until the earlier of the 2009
annual meeting of stockholders or the consummation of the
proposed merger.
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3.
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To ratify the appointment of KPMG LLP as FNFs independent
registered public accounting firm for its fiscal year ending
December 31, 2006.
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4.
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To conduct any other matters as may properly come before the
meeting and any adjournment or postponement of the meeting.
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In connection with the merger referenced in Proposal 1, FNF
stockholders will have the right to receive a number of shares
of FIS common stock in exchange for each share of FNF common
stock that they hold, equal to 96,521,877 (subject to increase
under certain circumstances as described in the proxy
statement/prospectus accompanying this notice) divided by the
number of shares of FNF common stock outstanding immediately
prior to the effective time of the merger. The terms and
provisions of the merger are more fully described in the
accompanying proxy statement/prospectus. A copy of the merger
agreement is attached to the accompanying proxy
statement/prospectus as Annex A. Under Delaware law,
dissenters rights will not be available to FNF
stockholders in connection with the merger.
Your vote is very important. To ensure that your shares
of FNF common stock are represented at the FNF Annual Meeting,
please complete, date, sign and return the enclosed proxy
card(s) and mail it promptly in the envelope provided, or vote
your shares by telephone or over the Internet as described in
the accompanying proxy statement/prospectus. Completing a proxy
now will not prevent you from being able to vote at the FNF
Annual Meeting by attending in person and casting a vote but
will help to secure a quorum and avoid additional solicitation
costs. However, if you do not return or submit the proxy or vote
in person at the FNF Annual Meeting, the effect will be the same
as a vote against the proposal to adopt the merger agreement and
approve the merger. You may revoke your proxy at any time before
it is voted. Any executed but unmarked proxy card(s) will be
voted FOR adoption of the merger agreement and approval
of the merger and FOR the other proposals properly
brought before the FNF Annual Meeting.
All FNF stockholders are cordially invited to attend this FNF
Annual Meeting, although only those stockholders of record at
the close of business on September 11, 2006 will be
entitled to receive notice of, and to vote at, the FNF Annual
Meeting or any adjournment thereof. Approval of Proposal 1
relating to the adoption of the merger agreement and approval of
the merger requires an affirmative vote of a majority of the
outstanding shares of common stock of FNF, approval of
Proposal 2 relating to the election of directors requires
an affirmative vote of a plurality of the votes cast at the FNF
Annual Meeting and approval of Proposal 3 relating to
ratification of the
appointment of KPMG LLP as FNFs independent auditors as
well as any other proposal that may be properly presented at the
FNF Annual Meeting requires an affirmative vote of a majority of
the votes cast at the FNF Annual Meeting. Your attention is
directed to the proxy statement/prospectus accompanying this
notice for a more complete statement regarding the matters
proposed to be acted upon at the meeting.
If the proposal relating to the adoption of the merger agreement
and approval of the merger receives the requisite number of
affirmative votes, it is expected that the merger would be
consummated shortly thereafter. In that event, and if the
proposal relating to the election of directors receives the
requisite number of affirmative votes, the newly elected
directors would serve only until such time as the merger is
consummated, as FNF will no longer exist as a separate entity.
FNFs board of directors has unanimously adopted the
merger agreement and approved the merger and determined that the
transactions contemplated by the merger agreement are advisable
and in the best interests of FNF and its stockholders.
FNFs board of directors recommends that you vote FOR
the adoption of the merger agreement and approval of the
merger.
Your vote is very important. Whether or not you plan to be
present at the FNF Annual Meeting, please complete, sign, date
and return the enclosed proxy card(s) or vote by
telephone or Internet as provided on the proxy card(s).
By Order of the Board of Directors,
Todd C. Johnson
Secretary
September 18, 2006
TABLE OF
CONTENTS
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EXHIBIT INDEX
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Agreement and Plan of Merger, dated
as of June 25, 2006, as amended and restated as of
September 18, 2006, between Fidelity National Information
Services, Inc. and Fidelity National Financial, Inc.
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A-1
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Amended and Restated Certegy Inc.
Stock Incentive Plan
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B-1
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Fidelity National Information
Services, Inc. Employee Stock Purchase Plan
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C-1
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Fidelity National Information
Services, Inc. Annual Incentive Plan
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D-1
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Opinion of Stephens, Inc., dated
June 25, 2006
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E-1
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Opinion of Bear Stearns &
Co. Inc., dated June 25, 2006
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F-1
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Securities Exchange and
Distribution Agreement, dated as of June 25, 2006, as
amended and restated as of September 18, 2006, between
Fidelity National Financial, Inc. and Fidelity National Title
Group, Inc.
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G-1
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EXHIBIT 4.1 |
EXHIBIT 5.1 |
EXHIBIT 23.1 |
EXHIBIT 23.2 |
EXHIBIT 23.3 |
EXHIBIT 99.1 |
EXHIBIT 99.2 |
EXHIBIT 99.3 |
EXHIBIT 99.4 |
EXHIBIT 99.5 |
iv
WHERE YOU
CAN FIND MORE INFORMATION
FIS and FNF file annual, quarterly and current reports, proxy
statements and other information with the U.S. Securities
and Exchange Commission, which we refer to as the SEC. In
addition, FIS has filed a registration statement under the
Securities Act with the SEC that registers the shares of FIS
common stock that may be issued in the merger. This proxy
statement/prospectus is a part of that registration statement.
The registration statement, including the attached exhibits and
schedules, contains additional relevant information about FIS.
The rules and regulations of the SEC allow us to omit from this
proxy statement/prospectus some of the information included in
the registration statement.
You may read and copy reports, statements or other information
filed by FIS and FNF at the SECs public reference room:
100 F
Street, N.E.
Room 1580
Washington, DC 20549
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room.
SEC filings made by FIS and FNF are also available for free to
the public on the SECs Internet website at www.sec.gov,
which contains reports, proxy and information statements and
other information regarding companies that file electronically
with the SEC.
In addition, FISs SEC filings are also available for free
to the public on FISs website,
www.fidelityinfoservices.com, and FNFs filings with the
SEC are also available for free to the public on FNFs
website, www.fnf.com. These URLs and the SECs URL above
are intended to be inactive textual references only. Information
contained on FISs website and FNFs website is not
incorporated by reference into this proxy statement/prospectus,
and you should not consider information contained on those
websites as part of this proxy statement/prospectus.
The SEC allows FIS and FNF to incorporate by
reference information into this proxy
statement/prospectus. This means that companies can disclose
important information to you by referring you to another
document filed separately with the SEC. The information
incorporated by reference is part of this proxy
statement/prospectus, except to the extent information included
in this proxy statement/prospectus or in a document subsequently
filed with the SEC that is incorporated by reference supersedes
it.
This proxy statement/prospectus incorporates by reference the
documents listed below that FIS and FNF have previously filed
with the SEC. These documents contain important information
about FIS and FNF and their respective financial condition.
FIS
SEC Filings (SEC File Number 1-6427)
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Annual Report on
Form 10-K
for the year ended December 31, 2005;
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Amended Annual Report on
Form 10-K
for the year ended December 31, 2005;
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Quarterly Reports on
Forms 10-Q
for the quarters ended March 31 and June 30, 2006;
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Current Reports on
Form 8-K
filed with the SEC on January 25, February 6,
March 17, and June 29, 2006; and
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The description of FISs common stock, par value $0.01 per
share, contained in FISs Registration Statement on
Form 10-12B/A
filed with the SEC on June 11, 2004, including any
amendment or report filed for the purpose of updating such
description.
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FNF
SEC Filings (SEC File Number 1-9396)
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Annual Report on
Form 10-K
for the year ended December 31, 2005;
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Amended Annual Report on
Form 10-K
for the year ended December 31, 2005;
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1
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Quarterly Reports on
Forms 10-Q
for the quarters ended March 31 and June 30, 2006;
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Current Reports on
Form 8-K
filed with the SEC on January 24, February 6,
February 6, February 14, March 6, May 5,
June 6, 2006 and June 29, 2006; and
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The description of FNFs common stock, par value
$0.0001 per share, contained in FNFs Registration
Statement on Form 8-A filed with the SEC on
February 4, 1992, including any amendment or report filed
for the purpose of updating such description.
|
FNF and FIS are also incorporating by reference any additional
documents that either of them may file with the SEC after the
date of this proxy statement/prospectus and before the date of
its respective annual meeting. These documents include reports,
such as Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
as well as proxy statements. Nothing in this proxy
statement/prospectus shall be deemed to incorporate information
furnished but not filed with the SEC pursuant to applicable SEC
rules and forms unless such furnished information otherwise
provides it is to be incorporated by reference.
FIS has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to FIS,
and FNF has supplied all information contained or incorporated
by reference in this proxy statement/prospectus relating to FNF.
You can obtain any of the documents incorporated by reference in
this document through FIS or FNF, as appropriate, or from the
SEC through the SEC web site referred to above. Documents
incorporated by reference are available from the applicable
company without charge, excluding any exhibits to those
documents unless the exhibit is specifically incorporated by
reference as an exhibit in this proxy statement/prospectus. You
can obtain documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by
telephone or email from the appropriate company at the following
addresses and telephone numbers or obtaining them from each
companys website listed below:
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Fidelity National Information
Services, Inc.
|
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Fidelity National Financial,
Inc.
|
601 Riverside Avenue
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|
601 Riverside Avenue
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Jacksonville, Florida 32204
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Jacksonville, Florida 32204
|
Attention: Corporate Secretary
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Attention: Corporate Secretary
|
(904)
854-8100
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(904) 854-8100
|
www.fidelityinfoservices.com
|
|
www.fnf.com
|
If you would like to request documents, you must do so by
October 16, 2006, in order to receive them before the
annual meetings. Requested documents will be
mailed to you by first-class mail, or another equally prompt
means, as promptly as practicable after receipt of your request.
You should rely only on the information contained or
incorporated by reference into this proxy statement/prospectus
in voting your shares at the annual meetings. We have not
authorized anyone to give any information or make any
representation about the merger or our companies that is
different from, or in addition to, that contained in this proxy
statement/prospectus or in any of the materials that we have
incorporated into this proxy statement/prospectus. If anyone
does give you information of this type, you should not rely on
it. If you are in a jurisdiction where offers to exchange or
sell, or solicitations of offers to exchange or purchase, the
shares of FIS common stock offered by this proxy
statement/prospectus or the solicitation of proxies is unlawful,
or if you are a person to whom it is unlawful to direct these
types of activities, then the offer presented in this proxy
statement/prospectus does not extend to you. The information
contained in this proxy statement/prospectus speaks only as of
the date of this proxy statement/prospectus unless the
information specifically indicates that another date applies.
2
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETINGS AND THE MERGER
The following questions and answers briefly address some
commonly asked questions about the annual meetings and the
merger. They do not include all the information that may be
important to you. FIS and FNF urge you to carefully read this
entire proxy statement/prospectus, including the annexes and the
other documents referenced in this proxy statement/prospectus.
Page references are included in certain parts of this summary to
direct you to a more detailed description of topics presented
elsewhere in this proxy statement/prospectus.
The
Merger
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|
Q: |
|
Why am I receiving this proxy statement/prospectus? |
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A: |
|
FNF and FIS (FNFs public subsidiary in which FNF currently
has a direct 50.5% interest and an indirect 0.8% interest
through subsidiaries) have agreed to enter into a merger
transaction whereby FNF would be merged with and into FIS, and
FNF stockholders would receive shares of FIS common stock in
exchange for their shares in connection with the merger. Upon
the consummation of the merger, FIS would be the surviving
corporation in the merger and FNFs separate corporate
existence would cease. The terms of the merger are set forth in
the merger agreement which is described in this proxy
statement/prospectus and attached to this proxy
statement/prospectus as Annex A. When the merger is
completed, FNF stockholders will have the right to receive a
number of shares of FIS common stock, par value $0.01 per
share, in exchange for each share of FNF common stock, par value
$0.0001 per share, that they hold, equal to the conversion
ratio as defined below. As a result of this formula, if the
merger were effected as of the date of this proxy
statement/prospectus, FNF stockholders would own 51.0% of the
outstanding common stock of FIS. FIS shareholders will not be
directly affected by the merger, except for FNF, whose shares of
FIS common stock will be retired as part of the merger, and for
limited changes described elsewhere in this proxy
statement/prospectus (such as changes in the potential number of
outstanding shares of FIS common stock and changes in management
and related-party agreements). |
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To complete the merger, FIS shareholders must vote to approve
the issuance of shares of FIS common stock in the merger and FNF
stockholders must vote to adopt the merger agreement and approve
the merger. FIS and FNF will hold separate annual meetings to
obtain these approvals. |
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This proxy statement/prospectus, which you should read
carefully, contains important information about the merger, the
merger agreement and the annual meetings. As to FNF
stockholders, the enclosed voting materials allow you to vote
your shares without attending the FNF Annual Meeting. The vote
of each FNF stockholder is very important. We encourage FNF
stockholders to vote as soon as possible. |
|
Q: |
|
What other transactions are contemplated in connection with
the merger? |
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|
A: |
|
The merger is part of a larger organizational restructuring of
FNF and its subsidiaries. In connection with the merger, on
June 25, 2006 Fidelity National Title Group, Inc.,
which we refer to as FNT, entered into a securities exchange and
distribution agreement, as amended and restated as of
September 18, 2006, which we refer to as the distribution
agreement, with FNF. Under the distribution agreement, FNF will
contribute substantially all of its assets (other than its
ownership interests in the capital stock of FIS, FNT and a small
wholly owned subsidiary of FNF, FNF Capital Leasing, Inc., which
we refer to as FNF Leasing) and liabilities to FNT in exchange
for shares of FNTs Class A common stock. Concurrently
with these transactions, all of the shares of FNT Class B
common stock held by FNF will be converted into shares of FNT
Class A common stock, and immediately thereafter, these
converted shares, together with the shares of FNT acquired by
FNF from FNT, will be distributed by FNF to the holders of FNF
outstanding capital stock. This distribution is referred to as
the spin-off. Pursuant to the spin-off, such FNF stockholders
will receive shares of FNT common stock representing
approximately 85% of FNTs common stock outstanding on a
fully-diluted basis immediately after the proposed transactions.
Shortly after the
spin-off,
FNF Leasing will merge with and into a newly formed wholly owned
subsidiary of FIS, which we refer to as the Leasing merger, in
exchange for the issuance to FNF of 307,377 shares of FIS common
stock. After the spin-off and Leasing merger, and immediately
prior to the merger, FNFs only asset would be its stock
ownership in FIS. It is expected that the merger would be
completed approximately two weeks following the spin-off. FNF
stockholders will also receive a prospectus of FNT relating to
the FNT shares to be distributed in the spin-off, which such
stockholders should read carefully. |
3
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In order to complete the proposed transactions under the
distribution agreement, all of the conditions to the
consummation of the merger of FNF and FIS and the Leasing merger
must be satisfied (other than (i) conditions that, by their
terms, are to be satisfied on the closing date for such
transactions, (ii) the occurrence of the spin-off and
(iii) in the case of the merger, the occurrence of the
Leasing merger). In addition, in order for the merger to be
completed, the proposed transactions under the distribution
agreement and the Leasing merger must first be completed. |
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In general terms, the proposed transactions contemplated under
the distribution agreement involve the transfer by FNF to FNT of
all of its right, title and interest to FNFs property and
casualty specialty insurance business, insurance claim
management services, real estate holdings and certain other
assets, including cash. In exchange, FNT will transfer to FNF a
number of shares of FNT Class A common stock, which we
refer to as the FNT exchange number, equal to
(i) 33,563,829 plus (ii) the amount of cash and
certain investment assets included in the contributed assets
(not to exceed $275,000,000 for purposes of this calculation)
divided by $23.50. FNT will also assume all liabilities of FNF,
except for: liabilities of FNF to the extent FIS or any
subsidiary of FIS or FNF Leasing or any subsidiary of FNF
Leasing has agreed in writing to be responsible therefor;
liabilities of FNF to the extent they relate to the ownership or
operation of the assets or properties, or the operations or
conduct of the business, of FIS or any subsidiary of FIS or FNF
Leasing or any subsidiary of FNF Leasing, in each case to the
extent FIS or any subsidiary of FIS or FNF Leasing or any
subsidiary of FNF Leasing has, as of or prior to the closing,
agreed to be responsible therefor; guaranties or other similar
contractual liabilities of FNF in respect of a primary liability
of FIS or any subsidiary of FIS or FNF Leasing or any subsidiary
of FNF Leasing; certain limited liabilities of FNF in respect of
taxes, which are the subject of a tax disaffiliation agreement
among FNF, FIS and FNT; certain liabilities arising from the
operations or conduct of the business of FNF after the date that
is 30 days after the closing under the distribution
agreement if the merger is not then complete; and liabilities
for any transaction bonuses (described below) that may be paid
to certain executive officers of FNF. |
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Following the completion of the proposed transactions, FNT will
change its name to Fidelity National Financial, Inc.
and FNTs common stock will be listed and traded on the New
York Stock Exchange under the symbol FNF. |
|
Q. |
|
Why are FNF and FIS entering into the merger? |
|
A: |
|
FNF and FIS are proposing the merger because they believe that
it will benefit the holders of stock of both companies. From
FNFs perspective, stockholders of FNF will receive
equivalent value for their current indirect holdings of FNT and
FIS in the form of direct holdings of FIS shares and FNT shares.
FNF believes that the holding company structure, with FNF
holding ownership stakes in public and private operating
subsidiaries, including FIS, has resulted in a discount in the
value of FNF in relation to the aggregate value of the
businesses it owns. Further, both FNF and FIS believe that the
majority ownership stake that FNF has in FIS limits the public
float of FIS, which may reduce the number of eligible
shareholders for FIS and limit trading liquidity, and thus limit
the valuation of the stock of FIS. Furthermore, eliminating the
majority ownership stake is expected to make it easier for FIS
to issue shares for acquisitions and for management incentives. |
|
Q: |
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When is the merger expected to be completed? |
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A: |
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If the shareholders of FIS and the stockholders of FNF both give
their approval in connection with the merger, the merger is
expected to be completed following the satisfaction of the other
conditions to the merger, including stockholders of FNT
approving the proposed transactions under the distribution
agreement, the occurrence of the spin-off in accordance with its
terms, the occurrence of the Leasing merger in accordance with
its terms, the receipt of a private letter ruling from the
Internal Revenue Service and one or more opinions from the
parties tax advisors, receipt of governmental and
regulatory consents and termination or expiration of any waiting
period under the Hart-Scott Rodino Act. There may be a
substantial period of time between the approval of the proposals
at the FIS Annual Meeting and the FNF Annual Meeting and the
effectiveness of the merger. The merger is currently expected to
be completed in the fourth quarter of 2006. |
|
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|
Q: |
|
What will FNF stockholders receive in the merger? |
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A: |
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Under the terms of the merger agreement, for each FNF share FIS
will issue that number of shares of FIS common stock equal to
96,521,877 divided by the aggregate number of shares of FNF
common stock |
4
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outstanding immediately prior to the effective time of the
merger. Alternatively, for each FNF share FIS may issue that
number of shares at FIS common stock equal to 96,624,336 divided
by the aggregate number of shares of FNF common stock
outstanding immediately prior to the effective time of the
merger under certain circumstances described below. We refer to
the number determined based on the foregoing calculations as the
conversion ratio. |
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The aggregate number of shares of FIS common stock that current
FNF stockholders will receive in connection with the merger
depends on the number of shares of FIS common stock issued to
FNF in connection with the Leasing merger. FNF Leasing currently
owns 75% of FNF Capital LLC, and based on that 75% ownership,
the number of shares of FIS common stock to be issued to FNF in
connection with the Leasing merger is 307,377. In such event,
the aggregate number of FIS shares to be issued to FNF
stockholders would be 96,521,877. If FNF Leasings
ownership of FNF Capital LLC increases to 100%, the number of
shares of FIS common stock to be issued to FNF in connection
with the Leasing merger would be 409,836. In such event, FNF
stockholders will have the right to receive an aggregate of
96,624,336 shares of FIS common stock. |
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Unless otherwise noted, this proxy statement/prospectus assumes
that FNF Leasing will continue to own only 75% of its subsidiary
FNF Capital LLC. However, approval of the issuance of shares
under the merger agreement will constitute approval of the
issuance of all shares that may be issued, including any
additional shares of FIS common stock that would be issued if
FNF Leasing increased its ownership of its subsidiary FNF
Capital LLC to 100%. |
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Accordingly, based on the 176,444,440 shares of FNF common
stock issued and outstanding as of August 31, 2006, each
FNF stockholder would receive 0.547 of a share of FIS common
stock (assuming the number of outstanding shares of FNF common
stock is the same immediately prior to the effective time of the
merger) per share of FNF common stock, which would represent
approximately 51.0% of the issued and outstanding FIS common
stock after the merger. In addition, as of such date there were
approximately 13.5 million outstanding options to purchase
FNF common stock. To the extent that any of these options are
exercised prior to the effective time of the merger, the amount
of FIS common stock received for each FNF share will decrease. |
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Q. |
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What will FIS shareholders receive in the merger? |
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A: |
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FIS shareholders (except FNF) will keep their current holdings
of FIS common stock. |
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Q: |
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What will happen to the shares of FIS common stock owned by
FNF at the time of the merger? |
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A: |
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These shares will be retired as of the effective time of the
merger. Consequently they will not be outstanding after such
time and will be returned to FISs authorized and unissued
share capital. |
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Q: |
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Will FIS issue fractional shares in the merger? |
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A: |
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No fractional shares of FIS common stock will be issued. Any
holder of shares of FNF common stock entitled to receive a
fractional share of FIS common stock will be entitled to receive
a cash payment in lieu thereof, in an amount equal to the
holders proportionate interest in the net proceeds from
the sale or sales in the open market by the exchange agent, on
behalf of all such holders, of the shares of FIS common stock
constituting the excess of (i) the number of whole shares
of FIS common stock delivered to the exchange agent by FIS over
(ii) the aggregate number of whole shares of FIS common
stock to be distributed to holders of FNF common stock, which we
refer to as the excess shares. As soon as practicable following
the effective time of the merger, the exchange agent will
determine the number of excess shares and, as agent for the
former holders of FNF common stock, will sell the excess shares
at the prevailing prices on the NYSE. The exchange agent will
deduct from the proceeds of the sale of the excess shares all
commissions, withholding taxes, transfer taxes and other
out-of-pocket
transaction costs including the expenses and compensation of the
exchange agent incurred, in connection with such sale of excess
shares. |
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Q: |
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What will happen to FNF stock options and shares of FNF
restricted stock? |
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A: |
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Prior to the merger, FNF stock options and shares of restricted
stock held by persons who will be employed by or serve as a
director of FNT, referred to as FNT service providers, will be
replaced with FNT stock options and shares of restricted stock
pursuant to the terms of the distribution agreement, except as
set forth below with respect to the dual service providers. At
the time of the merger, FNF stock options and shares of FNF
restricted |
5
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stock held by persons who will be employed by or serve as a
director of FIS, referred to as FIS service providers, will be
treated as follows: |
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Stock Options: FNF stock options
held by FIS service providers (other than dual service
providers) will be assumed by FIS, with the same terms and
conditions as the FNF options, but with equitable adjustments
made to the exercise prices and the number of shares underlying
the options to reflect the difference in value of FNF and FIS
common stock.
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Restricted Stock: All holders of
FNF restricted stock will receive FNT shares in connection with
the distribution of FNT shares in the same proportion as other
FNF stockholders, with such shares subject to the same transfer
restrictions and forfeiture conditions as the corresponding FNF
restricted stock based upon continued service with FNT or FIS,
as the case may be. Each share of FNF restricted stock held by
an FIS service provider (other than dual service providers) will
be converted into shares of FIS restricted stock based on the
conversion ratio. This FIS restricted stock will be subject to
the same transfer restrictions and forfeiture conditions as the
corresponding FNF restricted stock based upon continued service
with FIS.
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In addition, William P. Foley, II, Alan L. Stinson and
Brent B. Bickett entered into an agreement with FNF on
June 25, 2006, pursuant to which FNF has the right to cash
out a certain number of the FNF stock options held by
Messrs. Foley, Stinson and Bickett for their fair market
value as of the date FNF elects to exercise such right or cause
these individuals to exercise such options. With respect to FNF
stock options held by Messrs. Foley, Stinson and Bickett
that are not subject to the agreement, and with respect to FNF
stock options held by other persons who, like
Messrs. Foley, Stinson and Bickett, will be employed by or
serve as a director of both FNT and FIS after the transactions,
whom we refer to as dual service providers, 50% of the FNF
options held by these individuals will be assumed by FIS as
explained above, and the remaining 50% will be replaced with FNT
stock options pursuant to the terms of the distribution
agreement. In addition, with respect to dual service providers,
50% of their FNF restricted stock will be replaced with FNT
restricted stock and 50% will be converted into FIS restricted
stock. |
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As of August 31, 2006, the intrinsic value of all FNF
options held by FIS employees (including dual service providers)
would have resulted in the issuance of approximately
3.1 million FIS options. |
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Q: |
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Will the merger affect FIS stock options? |
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A: |
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For most employees, no. However, FIS stock options held by
an employee or director who will be employed solely by or serve
solely as a director of FNT will fully vest as of the effective
time of the spin-off. |
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Q: |
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What will happen to FNFs employee benefits plans in the
merger? |
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A: |
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Prior to the spin-off under the distribution agreement, FNF will
cause the sponsorship of all FNF employee benefit plans,
including all related insurance policies and service agreements,
to be transferred to FNT, and FNT will assume sponsorship of
such plans. |
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Q: |
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Will FNF employees who will work for FIS be eligible to
participate in FISs employee benefit plans? |
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A: |
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Yes. FIS will provide coverage for FNF employees who will become
employees of FIS under its health and welfare plans. FIS will
also cause any benefit plan in which employees of FNF and its
subsidiaries are eligible to participate after the spin-off to
take into account the employees service with FNF and its
subsidiaries for purposes of eligibility, vesting, and benefit
accrual. |
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Q: |
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What are the tax consequences of the merger to me? |
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A: |
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As one of the conditions to the consummation of the spin-off and
merger, FNF is to receive a ruling from the Internal Revenue
Service and an opinion of its special tax advisor, Deloitte Tax
LLP, together to the effect that the spin-off and merger will be
tax free under the Internal Revenue Code to FNF, FIS and
FNFs stockholders (except that FNFs stockholders
will recognize gain or loss attributable to the receipt of cash
in lieu of fractional shares of FNT common stock pursuant to the
spin-off and FIS common stock pursuant to the merger). The FIS
shareholders (other than FNF) are not parties to the proposed
transactions; therefore, there will be no tax consequences to
them as a result of the proposed transactions. |
6
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Q: |
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What will happen to the dividend on common shares for FIS and
FNF after completion of the merger? |
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A: |
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Upon completion of the merger, holders of FIS common stock will
continue to receive dividends, if declared by the FIS board of
directors, as they have been receiving them from FIS prior to
the merger. After the closing, former FNF stockholders who were
holders of certificated FNF common stock and have surrendered
their FNF share certificates according to the instructions
provided to them, will receive the same dividends, if any, on
the FIS shares that they receive in the merger that all other
holders will receive on FIS common stock with any dividend
record date that occurs after the merger is completed. Former
FNF stockholders who hold FNF stock certificates will not be
entitled to receive dividends otherwise payable on the FIS
common stock into which their FNF common stock is exchangeable
until they surrender their FNF stock certificates according to
the instructions provided to them. Dividends will be accrued for
these stockholders and they will receive the accrued dividends
when they surrender their FNF stock certificates. |
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FIS began declaring cash dividends to common shareholders in the
first quarter of 2006. The declaration and payment of future
dividends is at the discretion of the FIS board of directors,
and depends on, among other things, FISs investment policy
and opportunities, results of operations, financial condition,
cash requirements, future prospects, and other factors that may
be considered relevant by the FIS board of directors, including
legal and contractual restrictions. |
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Q: |
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Are there risks I should consider in deciding whether to vote
for the merger? |
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A: |
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Yes. A description of some of the risks that should be
considered in connection with the merger is included in this
proxy statement/prospectus under the heading Risk
Factors. |
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Q: |
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How do I vote? |
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A: |
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If you are a stockholder of FNF, you may vote before the FNF
Annual Meeting in one of the following ways: |
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use the toll-free number shown on your proxy card
and follow the instructions on the proxy card;
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by Internet, use a unique password printed on your
proxy card and follow instructions on the proxy card; or
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complete, sign, date and return the enclosed proxy
card in the enclosed postage-paid envelope.
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If you are a shareholder of FIS, you are not being solicited to
complete and return a proxy card. You are invited to attend and
vote at the FIS Annual Meeting, but based on FNFs and its
subsidiaries ownership of approximately 51.3% of
FISs voting power, the minimum requisite amount of votes
for adoption of the proposal that FIS issue shares of its common
stock pursuant to the merger agreement and for all the other
proposals at the FIS Annual Meeting will be obtained through the
vote by FNF of its FIS shares. |
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Q: |
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What does it mean to vote by proxy? |
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A: |
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It means that you give someone else the right to vote your
shares in accordance with your instructions. In this case, FNF
is asking you to give your proxy to FNFs Chief Executive
Officer and Chairman of the Board and to FNFs Executive
Vice President and Chief Operating Officer, who are sometimes
referred to as the proxy holders. By giving your
proxy to the proxy holders, you assure that your vote will be
counted even if you are unable to attend the annual meeting. If
you give your proxy but do not include specific instructions on
how to vote on a particular proposal described in this proxy
statement/prospectus, the proxy holders will vote your shares in
accordance with the recommendation of the board of directors for
such proposal. |
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Q: |
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If my FNF shares are held in street name by my
broker, will my broker automatically vote my shares for me? |
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A: |
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No. Your broker does not have authority to vote on the
proposals in connection with the merger without instruction from
you. Your broker will vote your FNF shares held by it in
street name only if you provide instructions to it
on how to vote with respect to these matters. You should follow
the directions your broker provides. |
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Q: |
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What if I do not vote my FNF shares on the matters relating
to the merger? |
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A: |
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If you are an FNF stockholder and you fail to respond with a
vote or instruct your broker how to vote on the merger proposal,
it will have the same effect as a vote against the proposal. If
you respond and abstain from |
7
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voting, your proxy will have the same effect as a vote against
the proposal. If you respond but do not indicate how you want to
vote on the proposal, your proxy will be counted as a vote in
favor of the proposal. |
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Q: |
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What happens if other matters are raised at the meeting? |
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A: |
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Although FIS and FNF are not aware of any matters to be
presented at the annual meetings other than those contained in
the Notices of Annual Meeting, if other matters are properly
raised at either meeting in accordance with the procedures
specified in FISs charter and bylaws or in FNFs
charter and bylaws, such matters will be acted upon. In the case
of FNF, all FNF proxies given to the proxy holders will be voted
in accordance with the proxy holders best judgment and
stockholders attending the FNF Annual Meeting (other than those
who have given and not revoked proxies) will be given the chance
to vote on such other matters, and in the case of FIS,
shareholders attending the FIS annual meeting will be given the
chance to vote on such other matters. |
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Q: |
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Who can answer questions about the merger? |
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A: |
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If you are an FIS shareholder or an FNF stockholder and you have
any questions about the merger or your annual meeting, need
assistance in voting your shares, or need additional copies of
this proxy statement/prospectus or the enclosed proxy card(s),
you should contact: |
Morrow &
Co.
470 West
Avenue
Stamford, CT 06902
(800) 662-5200
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Q: |
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What should I do now? |
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A: |
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You should read this proxy statement/prospectus carefully,
including the annexes. If you are an FNF stockholder and you own
FNF common stock in your own name, return your completed, signed
and dated proxy card(s) by mail in the enclosed postage-paid
envelope or vote by telephone or over the Internet as soon as
possible so that your shares will be represented and voted at
the FNF Annual Meeting. If you are an FNF stockholder and your
shares are held in street name through a broker,
bank or other nominee, please follow the voting instructions
provided by your broker, bank or other nominee. |
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Q: |
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Should I send in my FNF stock certificates with my proxy
card? |
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A: |
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No. On or promptly after the completion of the merger,
Continental Stock Transfer & Trust, FNFs exchange
agent for purposes of the merger, will mail a transmittal letter
to FNF stockholders, which transmittal letter will provide
instructions for use in effecting the surrender of FNF stock
certificates in exchange for FIS shares and, if applicable, cash
in lieu of fractional shares. No stock certificates should be
sent to either FNF or FIS. |
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Q: |
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If I am an FNF stockholder and am going to attend the FNF
Annual Meeting, should I return my proxy card(s)? |
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A: |
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Yes. Returning your signed and dated proxy card(s) or voting by
telephone or over the Internet ensures that your shares will be
represented and voted at the FNF Annual Meeting. See The
FNF Annual Meeting How to Vote beginning on
page 40. |
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Q: |
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What does it mean if I receive multiple proxy card(s)? |
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A: |
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Your shares may be registered in more than one account, such as
a brokerage account and a 401(k) account. It is important that
you complete, sign, date and return each proxy card you receive,
or, if available, vote using the telephone or the Internet as
described in the instructions included with your proxy card(s). |
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Q: |
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If I am an FNF stockholder, can I change my vote after I
deliver my proxy? |
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A: |
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Yes. You may change your vote at any time before the vote takes
place at the FNF Annual Meeting. To change your vote, you may
submit a new proxy card(s) by mail or submit a new proxy by
telephone or over the Internet. An FNF stockholder of record may
send a signed written notice to FNFs Corporate Secretary
stating that he/she would like to revoke
his/her
proxy. If your shares are held in a street name
account, you must contact your broker, bank or other nominee to
change your vote. |
8
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You may also change your vote by attending the FNF Annual
Meeting and voting in person. However, if you elect to vote in
person at the FNF Annual Meeting and your shares are held by a
broker, bank or other nominee, you must bring to the meeting a
legal proxy from the broker, bank or other nominee authorizing
you to vote the shares. |
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Q: |
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What constitutes a quorum? |
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A: |
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A quorum is present if a majority of the outstanding shares of
common stock entitled to vote is represented. Broker non-votes
and abstentions will be counted for purposes of determining
whether a quorum is present. |
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Q: |
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What are broker non-votes? |
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A: |
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Broker non-votes occur when nominees, such as banks and brokers
holding shares on behalf of beneficial owners, do not receive
voting instructions from the beneficial holders at least ten
days before the meeting. If that happens, the nominees may vote
those shares only on matters deemed routine by the
NYSE, such as election of directors or ratification of auditors.
Nominees cannot vote on non-routine matters, unless they receive
voting instructions from beneficial holders, resulting in
so-called broker non-votes. For purposes of the NYSE
requirement that the total votes cast represent over fifty
percent of all shares entitled to vote on a proposal, broker
non-votes will not count as votes cast. For purposes of the
Delaware law requirement that the FNF proposals receive the
affirmative vote of a majority of the shares present or
represented by proxy and entitled to vote, broker non-votes will
have no effect. |
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Q: |
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What if I share a household with another stockholder? |
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A: |
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Both FIS and FNF have adopted a procedure approved by the SEC
called householding. Under this procedure,
shareholders/stockholders of record who have the same address
and last name and do not participate in electronic delivery of
proxy materials will receive only one copy of an annual report
and this proxy statement/prospectus unless one or more of these
shareholders/stockholders notifies FIS or FNF that they wish to
continue receiving individual copies. This procedure will reduce
printing costs and postage fees for both companies.
Shareholders/stockholders who participate in householding will
continue to receive separate proxy cards. Also, householding
will not in any way affect dividend check mailings. If you are
eligible for householding, but you and other
shareholders/stockholders of record with whom you share an
address currently receive multiple copies of annual reports
and/or proxy
statements, or if you hold stock in more than one account, and
in either case you wish to receive only a single copy of the
annual report
and/or proxy
statement for your household, please contact FNFs transfer
agent, Continental Stock Transfer & Trust (in writing:
17 Battery Place, 8th Floor, New York, NY 10004; by
telephone:
(212) 509-4000)
or FISs transfer agent, Computershare Investor Services
(in writing: P.O. Box 43023, Providence, RI 02940, by
telephone:
(781) 575-3605).
If you participate in householding and wish to receive a
separate copy of the 2005 Annual Report for FIS or FNF or this
proxy statement/prospectus, or if you do not wish to participate
in householding and prefer to receive separate copies of future
annual reports
and/or proxy
statements, please contact Continental Stock Transfer &
Trust, in the case of FNF, or Computershare Investor Services,
in the case of FIS, as indicated above. Beneficial stockholders
can request information about householding from their banks,
brokers or other holders of record. Both FIS and FNF hereby
undertake to deliver promptly upon written or oral request, a
separate copy of their respective annual report to stockholders,
or proxy statement, as applicable, to FIS shareholders or FNF
stockholders at a shared address to which a single copy of the
document was delivered. |
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Q: |
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Where can I find more information about FIS and FNF? |
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A: |
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You can find more information about FIS and FNF from various
sources described under Where You Can Find More
Information beginning on page 1. |
9
SUMMARY
This summary highlights selected information contained in
this proxy statement/prospectus and may not include all the
information that is important to you. To understand fully the
proposed merger, and for a more detailed description of the
terms and conditions of the merger and other matters being
considered at your annual meeting, you should read this entire
proxy statement/prospectus and the documents to which we have
referred you. See Where You Can Find More
Information beginning on page 1. We have included
page references parenthetically in this summary to direct you to
a more detailed description of each topic presented in this
summary.
Information
about FIS (beginning on page 146)
On February 1, 2006, FIS, then named Certegy Inc., which we
refer to as Certegy, consummated a business combination with
Fidelity National Information Services, Inc., a Delaware
corporation, which we refer to as Old FIS. FIS has combined the
technology solutions, processing services and information
services of Old FIS with the card and check services of Certegy
to create a business that offers a wide range of product,
service and solutions offerings to financial institutions,
mortgage lenders, real estate professionals and merchants in the
United States and internationally.
Over 7,800 financial institutions use FISs technology
solutions, processing services and information services,
including 44 of the 50 largest banks in the United States.
FISs technology solutions process nearly 50% of all
U.S. residential mortgage loans by dollar volume with
balances exceeding $3.8 trillion, and over 235 million
deposit accounts and non-mortgage consumer loans and leases are
processed on its core bank processing platform. FIS also
provides customized business process outsourcing related to
aspects of the origination and management of mortgage loans to
national lenders and loan servicers. As a result of the
combination with Old FIS, FIS now provides services that span
the entire home purchase and ownership life cycle, from contract
through closing, refinancing and resale. The information
services FIS offers, including property data and real
estate-related services, are used by mortgage lenders, mortgage
investors and real estate professionals to complete residential
real estate transactions throughout the United States.
Information
about FNF (beginning on page 146)
FNF is a holding company that, through its operating
subsidiaries, provides outsourced products and services to a
variety of industries. During 2005, FNF completed certain
strategic initiatives, including contributing its title
operations to a newly formed subsidiary, FNT, which in turn
became a majority-owned, publicly traded company; selling a
minority interest in FNFs subsidiary, Old FIS; and
agreeing to merge Old FIS with a separate publicly-traded
company, Certegy. Through FNT, FNF is one of the largest title
insurance companies in the United States, with FNT having
approximately 29.0% national market share. Through FIS, FNF
provides industry leading data processing, payment and risk
management services to financial institutions and retailers.
Through FNFs other wholly-owned subsidiaries, FNF provides
specialty insurance products, including flood insurance,
homeowners insurance and home warranty insurance. Since
February 1, 2006, when FNF closed its acquisition of an
approximately 40% interest in Sedgwick CMS Holdings, Inc., which
we refer to as Sedgwick, FNF has, through its operating
subsidiaries, been a provider of outsourced insurance claims
management services to large corporate and public sector
entities. As described below, immediately prior to the merger,
FNF will have no assets other than its ownership of FIS common
stock and its rights under certain agreements entered into
pursuant to the securities exchange and distribution agreement
between FNF and FNT.
The
Merger (beginning on page 43)
General
FIS and FNF have reached an agreement for FIS to acquire FNF by
merging FNF with and into FIS. Upon completion of the merger,
the separate corporate existence of FNF will cease and FIS will
continue as the surviving corporation. At the same time that it
entered into the merger agreement with FIS, FNF entered into the
securities exchange and distribution agreement, which we refer
to as the distribution agreement, with FNT under which FNF will
transfer its interests in certain companies and certain other
assets to FNT in exchange for shares of FNT Class A common
stock and the assumption by FNT of certain liabilities of FNF
(as provided in the distribution agreement) prior to the merger
of FNF into FIS. Following the contribution of assets by FNF to
FNT, FNF will convert all of its shares of FNT Class B
common stock into shares of FNT Class A common stock.
Immediately thereafter, FNF will distribute the converted
shares, together with the shares of FNT Class A common
stock transferred to FNF by FNT,
10
to the holders of the outstanding capital stock of FNF. We
refer to this distribution as the spin-off. Upon completion of
the spin-off, FNF will have no assets other than its ownership
of FIS common stock and ownership of FNF Leasing, which will
merge with and into a subsidiary of FIS shortly after the
spin-off. The merger agreement provides that prior to the
effective time of the merger, FIS will amend and restate the
Amended and Restated Certegy Inc. Stock Incentive Plan to
increase the total number of shares available by an additional
4,000,000 shares. It is contemplated that the merger would be
completed approximately two weeks following the spin-off.
The boards of directors of FIS and FNF both believe that the
merger will provide benefits to their respective shareholders
and stockholders and that the merger will be in the best
interests of their respective companies, shareholders and
stockholders. To review the reasons for the merger in greater
detail, see The Merger FISs Reasons for
the Merger and Recommendation of FISs Board of
Directors beginning on page 51 and The
Merger FNFs Reasons for the Merger and
Recommendation of FNFs Board of Directors beginning
on page 52.
We urge you to read carefully the entire merger agreement
attached to this proxy statement/prospectus as
Annex A because it sets forth the terms of and is
the principal legal document governing the merger.
Required
Votes
The proposal relating to the issuance of shares of FIS common
stock in connection with the merger requires the approval of a
majority of the votes cast on such proposal by the holders of
FIS common stock at the FIS Annual Meeting. FNF will vote its
FIS common stock in favor of the issuance of shares. See
The FIS Annual Meeting Quorum and Voting
Rights beginning on page 36.
The affirmative vote of holders of a majority of the outstanding
shares of FNF common stock is required for adoption of the
merger agreement and approval of the merger by the FNF
stockholders. See The FNF Annual Meeting
Quorum and Voting Rights beginning on page 38.
Merger
Consideration
When the merger is completed, FNF stockholders will have the
right to receive that number of shares of FIS common stock in
exchange for each share of FNF common stock that they hold,
equal to 96,521,877 divided by the number of FNF shares
outstanding immediately prior to the effective time of the
merger. Alternatively, FNF stockholders may have the right to
receive that number of shares of FIS common stock in exchange
for each share of FNF common stock that they hold, equal to
96,624,336 divided by the aggregate number of FNF shares
outstanding immediately prior to the effective time of the
merger under certain circumstances described below. We refer to
the number determined based on the foregoing calculations as the
conversion ratio.
The aggregate number of shares of FIS common stock that current
FNF stockholders will receive in connection with the merger
depends on the number of shares of FIS common stock issued to
FNF in connection with the Leasing merger. FNF Leasing currently
owns 75% of FNF Capital LLC, and based on that 75% ownership,
the number of shares of FIS common stock to be issued to FNF in
connection with the Leasing merger is 307,377. In such event,
the aggregate number of FIS shares to be issued to FNF
stockholders would be 96,521,877. If FNF Leasings
ownership of FNF Capital LLC increases to 100%, the number of
shares of FIS common stock to be issued to FNF in connection
with the Leasing merger would be 409,836. In such event, FNF
stockholders will have the right to receive an aggregate of
96,624,336 shares of FIS common stock.
Unless otherwise noted, this proxy statement/prospectus assumes
that FNF Leasing will continue to own only 75% of its subsidiary
FNF Capital LLC. However, approval of the issuance of shares
under the merger agreement will constitute approval of the
issuance of all shares that may be issued, including any
additional shares of FIS common stock that would be issued if
FNF Leasing increased its ownership of its subsidiary FNF
Capital LLC to 100%.
Accordingly, based on the 176,444,440 shares of FNF common
stock issued and outstanding as of August 31, 2006, each
FNF stockholder would receive 0.547 of a share of FIS common
stock (assuming the number of outstanding shares of FNF common
stock is the same immediately prior to the effective time of the
merger) for each share of FNF common stock. In addition, as of
August 31, 2006, the number of outstanding options to
purchase FNF common stock was approximately 13.5 million.
To the extent any of these FNF options are exercised prior to
the effective time of the merger, the amount of FIS common stock
received for each FNF share will decrease. Upon
11
consummation of the merger, FNFs existence as a separate
entity will cease, its ownership interest in FIS will terminate
and its FIS shares will be retired to FISs authorized and
unissued share capital. FISs shareholders will not be
directly affected by the merger, except as otherwise described
under the section of this proxy statement/prospectus captioned
The Merger Agreement Holders of FIS Common
Stock on page 75.
No fractional shares of FIS common stock will be issued. Any
holder of shares of FNF common stock entitled to receive a
fractional share of FIS common stock will be entitled to receive
a cash payment in lieu thereof, in an amount equal to that
holders proportionate interest in the net proceeds from
the sale or sales in the open market by the exchange agent, on
behalf of all such holders, of the shares of FIS common stock
constituting the excess of (i) the number of whole shares
of FIS common stock delivered to the exchange agent by FIS over
(ii) the aggregate number of whole shares of FIS common
stock to be distributed to holders of FNF common stock, which we
refer to as the excess shares. As soon as practicable following
the effective time of the merger, the exchange agent will
determine the number of excess shares and, as agent for the
former holders of FNF common stock, will sell the excess shares
at the prevailing prices on the NYSE. The exchange agent will
deduct from the proceeds of the sale of the excess shares all
commissions, withholding taxes, transfer taxes and other
out-of-pocket
transaction costs, including the expenses and compensation of
the exchange agent, incurred in connection with such sale of
excess shares.
The stock consideration and cash in lieu of fractional shares
that FIS will pay to FNF stockholders is referred to as the
merger consideration. The number of shares to be issued by FIS
is fixed and neither FIS nor FNF has the right to terminate the
merger agreement based solely on changes in either partys
stock price. The market value of FIS common stock that FNF
stockholders receive in the merger may fluctuate significantly
from its current value.
Holders
of FIS Common Stock (beginning on page 75)
The shares of FIS common stock held by FIS shareholders will not
be directly affected by the merger, except that the shares of
FIS common stock held by FNF will be retired and the percentage
of total FIS common shares outstanding owned by FIS shareholders
immediately prior to the consummation of the merger will be
subject to dilution by FNF stock options assumed by FIS and
converted into FIS stock options in connection with the merger.
As of August 31, 2006, there were approximately
2.8 million FNF options outstanding that were held by
employees of FIS or employees and directors of FNF who will
become employees or directors of FIS. Any of these options that
remain outstanding as of the consummation of the merger will be
assumed by FIS and converted into FIS options based on their
intrinsic value as of the consummation of the merger.
Additionally, we anticipate that 1,410,000 FIS options will be
granted to certain executive officers and non-employee FIS
directors upon consummation of the merger.
Interests
of Directors and Executive Officers in the Proposed Transactions
(beginning on page 66)
In connection with the proposed transactions, FIS will enter
into a new employment agreement with Mr. Foley effective as
of the spin-off, and he will also receive a grant of 830,000
options to purchase shares of FISs common stock, with
3 year graded vesting (1/3 each year) and a
7 year term, immediately following the merger.
Additionally, Mr. Foley currently holds
5,408,216 options to purchase FNF common stock, a portion
of which will be converted into options to purchase FIS or FNT
stock as described below, although 3,856,684 of such options
will be exercised or cashed out prior to the spin-off pursuant
to the terms of the option letter agreement among FNF,
William P. Foley, II, Alan L. Stinson and Brent
B. Bickett. See The Merger Agreement Principal
Covenants and Agreements Other Covenants and
Agreements Option Letter Agreement beginning
on page 76. In addition, Mr. Foley owns, in the
aggregate, 5,752,040 shares including
110,000 restricted shares of FNF common stock and will
receive shares of FISs common stock, with the shares
received in respect of restricted stock to be subject to the
same terms, conditions and restrictions, in respect thereof in
connection with the merger. Other officers and directors of FNF
and FIS also own shares of FNF stock, FNF options and restricted
stock that will be similarly treated in connection with the
merger.
Also in connection with the proposed transactions, FNT will
enter into a new employment agreement with Mr. Foley and he
will also receive a grant of 475,000 shares of FNT
restricted stock.
Both FIS and FNT will enter into new employment agreements with
Messrs. Stinson and Bickett, and both will receive equity
awards from FIS and FNT in connection with the proposed
transactions.
12
Under the distribution agreement, FNT has agreed to indemnify
each person who, prior to the closing, was an officer or
director of FNF to the same extent that such officer or director
was indemnified by FNF under FNFs charter and by-laws. FNT
will also purchase and maintain for at least six years after
date of closing a directors and officers insurance
policy insuring directors, officers and employees of FNF and its
subsidiaries (but not directors, officers or employees of FIS
and its subsidiaries acting in their capacity as such) and
providing coverage at least as favorable to the insured persons
as FNFs current directors and officers
insurance.
In addition, the FNF Compensation Committee is evaluating paying
transaction bonuses to a group of officers of FNF, including
Messrs. Foley, Stinson, and Bickett. The purpose of the
transaction bonus is to reward certain officers for their
efforts towards successful completion of the merger and the
proposed transactions. The merger is the final step of
FNFs long-term strategy, which has included previous
acquisitions (Alltel Information Services for example) and
reorganizations. The result of FNFs long-term strategy has
been the creation of significant value for shareholders and a
rate of return that has consistently been better than that of
the S&P 500 since 1987. If FNF shareholders approve the
proposed transactions and the Committee is confident that the
transactions will close, the Committee will grant the bonuses
(the bonuses would be paid just prior to the closing of the
spin-off). Although no bonus will actually be granted by the
Committee until shortly prior to the spin-off, the Committee
currently would expect to award Mr. Foley a bonus of
$19.0 million and Messrs. Stinson and Bickett each a
bonus of $2.2 million. The other officers would receive
aggregate bonuses of $1.6 million. The FNF special
committee has reviewed the proposed transaction bonuses and
approved the grant thereof in connection with the transaction.
Certain members of FNFs board of directors will become
members of the board of FIS or FNT in connection with the
transactions.
FNF
Equity Awards (beginning on page 74)
As of the spin-off, FNF stock options and shares of restricted
stock held by persons who will be employed by or serve as a
director of FNT, which we refer to as an FNT service provider,
will be replaced with FNT stock options and shares of restricted
stock pursuant to the terms of the distribution agreement. At
the time of the merger, FNF stock options and shares of FNF
restricted stock held by persons who will be employed by or
serve as a director of FIS, which we refer to as FIS service
providers, will be treated as follows:
Stock
Options
FNF stock options held by FIS service providers will be assumed
by FIS and converted into FIS stock options, with the same terms
and conditions as the FNF stock options, but with equitable
adjustments made to the exercise prices and the number of shares
underlying the options to reflect the difference in value of FNF
and FIS common stock.
In addition, Messrs. Foley, Stinson and Bickett entered
into an agreement with FNF, pursuant to which FNF has the right
to cash out a certain number of the FNF stock options held by
Messrs. Foley, Stinson and Bickett for their fair market
value as of the date FNF elects to exercise such right or cause
these individuals to exercise such options. With respect to the
FNF stock options held by Messrs. Foley, Stinson and
Bickett that are not subject to the agreement, and with respect
to FNF stock options held by other persons who, like
Messrs. Foley, Stinson and Bickett, will be employed by or
serve as a director of both FNT and FIS after the transactions,
whom we refer to as dual service providers, 50% of such options
will be assumed by FIS and converted into FIS stock options, as
described above, and the remaining 50% of such options will be
replaced with FNT stock options pursuant to the terms of the
distribution agreement. In addition, with respect to dual
service providers, 50% of their FNF restricted stock will be
replaced with FNT restricted stock and 50% will be converted
into FIS restricted stock.
As of August 31, 2006, the intrinsic value of the FNF
options that, if outstanding as of the merger closing, would
have been converted into FIS options would have resulted in the
issuance of approximately 3.1 million FIS options.
Restricted
Stock
All holders of shares of FNF restricted stock will receive FNT
shares in connection with the spin-off in the same proportion
with respect to their restricted stock as other FNF
stockholders, with such shares subject to the same terms,
conditions and restrictions applicable to the corresponding FNF
restricted stock based upon continued service with FNT or FIS,
as the case may be. At the time of the merger, the shares of FNF
restricted stock held by FIS
13
service providers will be converted into shares of FIS
restricted stock based on the conversion ratio. This FIS
restricted stock will be subject to the same transfer
restrictions and forfeiture conditions as the corresponding FNF
restricted stock based upon continued service with FIS.
For a full description of the treatment of FNF equity awards,
see The Merger Agreement Effect of Merger on
FNF Equity Awards beginning on page 74.
Employee
Benefit Plans (beginning on page 75)
FIS has agreed to provide coverage under its health and welfare
plans to employees of FNF who will become employees of FIS. FIS
has also agreed to cause any benefit plan in which employees of
FNF and its subsidiaries are eligible to participate after the
spin-off to take into account for purposes of eligibility,
vesting and benefit accrual, service with FNF and its
subsidiaries. Prior to the spin-off under the distribution
agreement, FNF will cause the sponsorship of all FNF employee
benefit plans, including all related insurance policies and
service agreements, to be transferred to FNT, and FNT will
assume sponsorship of such plans.
Opinions
of Financial Advisors (beginning on page 53)
Under the original securities exchange and distribution
agreement, FNT agreed to transfer to FNF a number of shares of
FNT Class A common stock equal to (i) 34,042,553 plus
(ii) the amount of cash and certain investment assets
included in the contributed assets (not to exceed $275,000,000
for purposes of this calculation) divided by $23.50 (we refer to
this number as the original FNT exchange number). Under the
original merger agreement, when the merger is completed, FNF
stockholders would have had the right to receive that number of
shares of FIS common stock in exchange for each share of FNF
common stock that they hold, equal to 96,214,500 divided by the
number of FNF shares outstanding immediately prior to the
effective time of the merger (we refer to the number determined
after giving effect to this calculation as the original
conversion ratio).
In connection with the original merger agreement, FISs
board of directors has received an opinion, dated June 25,
2006, from its financial advisor Stephens, Inc. to the effect
that as of the date of the opinion, the original conversion
ratio in the merger is fair, from a financial point of view, to
the shareholders of FIS other than FNF. The FIS Board also
considered Stephens advice that the Leasing merger would
not have materially affected its original opinion. FNFs
board of directors has received an opinion, dated June 25,
2006, from its financial advisor Bear Stearns & Co.
Inc. to the effect that as of the date of the opinion, the
original conversion ratio, the original FNT exchange number and
the spin-off, taken as a whole, were fair, from a financial
point of view, to FNF and the FNF stockholders. The opinions are
attached as Annexes D and E to this proxy
statement/prospectus. FIS and FNF encourage you to read these
opinions in their entirety.
Record
Date; Shares Entitled to Vote; Outstanding Shares
(beginning on page 36 for FIS and page 38 for
FNF)
FIS Shareholders. The record date for the FIS
Annual Meeting was September 11, 2006. This means that you
must have been a shareholder of record of FIS common stock at
the close of business on September 11, 2006 in order to
vote at the FIS Annual Meeting. You are entitled to one vote for
each share of FIS common stock you owned on the record date. On
FISs record date, a total of 190,412,587 shares of
FIS common stock were outstanding.
FNF Stockholders. The record date for the FNF
Annual Meeting was September 11, 2006. This means that you
must have been a stockholder of record of FNFs common
stock at the close of business on September 11, 2006, in
order to vote at the FNF Annual Meeting. You are entitled to one
vote for each share of FNF common stock you owned on the record
date. On FNFs record date, a total of
176,603,760 shares of FNF common stock were outstanding.
Expected
Completion of the Merger (beginning on page 82)
If the issuance of shares of FIS common stock is approved at the
FIS Annual Meeting and the merger agreement and merger adopted
and approved at the FNF Annual Meeting, the merger is expected
to be completed approximately two weeks following the completion
of the spin-off in accordance with its terms. There may be a
substantial period of time between the approval of the proposals
by shareholders at the FIS Annual Meeting and stockholders at
the FNF
14
Annual Meeting and the effectiveness of the merger. The merger
is currently expected to be completed in the fourth quarter of
2006. See The Merger Agreement Principal
Conditions to Completion of the Merger.
Stock
Ownership of Directors and Executive Officers (beginning on
page 37 for FIS and page 39 for FNF)
FIS. At the close of business on the record
date for the FIS Annual Meeting, directors and executive
officers of FIS and their affiliates were entitled to vote
approximately 0.33 million shares of FIS common stock,
collectively representing 0.1% of the shares of FIS common
stock outstanding on that date.
FNF. At the close of business on the record
date for the FNF Annual Meeting, directors and executive
officers of FNF and their affiliates were entitled to vote
approximately 6.27 million shares of FNF common stock,
collectively representing 3.6% of the shares of FNF common
stock outstanding on that date.
FNF Stock
Ownership of FIS Before the Merger
FNF currently directly owns approximately 50.5% of the issued
and outstanding shares of FIS common stock and indirectly,
through FNTs wholly owned subsidiaries Chicago
Title Insurance Company and Fidelity National
Title Insurance Company, owns approximately a further 0.8%
of the issued and outstanding shares of FIS common stock.
Wherever in this proxy statement/prospectus we state that FNF
currently owns approximately 51.3%, this is a reference to FNF
directly owning approximately 50.5% of the shares of FIS common
stock and indirectly owning approximately 0.8% of the shares of
FIS common stock. FIS has agreed to purchase all FIS shares held
by FNT and its subsidiaries as of the business day prior to the
completion of the spin-off for a price in cash equal to the
closing price of such stock as of the preceding trading day.
Post-Merger
Executive Officers and Directors (beginning on
page 66)
The size of FISs board of directors will be increased from
ten to eleven in connection with the merger through the addition
as a director of Richard N. Massey, who currently serves on
the FNF board.
This proxy statement/prospectus contains a proposal relating to
the election of four members of the board of directors of FIS:
William P. Foley, II, Thomas M. Hagerty, Daniel D. (Ron) Lane
and Robert M. Clements. See Additional Proposals for the
FIS Annual Meeting Proposal 5: Election of
Directors.
This proxy statement/prospectus also contains a proposal
relating to the election of two members of the board of
directors of FNF: John F. Farrell, Jr. and Daniel D. (Ron)
Lane. If the proposals relating to the adoption of the merger
agreement receive the requisite number of affirmative votes, it
is expected that the merger would be consummated shortly
thereafter. In that event, and if the proposal relating to the
election of FNF directors receives the requisite number of
affirmative votes, the newly elected FNF directors would serve
only until such time as the merger is consummated given that
upon the consummation of the merger FNF will no longer exist as
a separate entity. See Additional Proposals for the FNF
Annual Meeting Proposal 2: Election of
Directors.
Listing
of FIS Common Stock and Delisting of FNF Common Stock (beginning
on page 68)
The shares of FIS common stock issued in connection with the
merger will be listed on the NYSE together with the other shares
of FIS common stock currently listed for trading on the NYSE
under the symbol FIS. If the merger is completed,
FNF common stock will no longer be listed on the NYSE and will
be deregistered under the Securities Exchange Act of 1934, as
amended, which we refer to as the Exchange Act, and FNF will no
longer file periodic reports with the SEC.
Dissenters
Rights (beginning on page 69)
Under Georgia law, holders of FIS common stock are not entitled
to dissenters rights in connection with the merger. Under
Delaware law, holders of FNF common stock are not entitled to
dissenters rights in connection with the merger.
Conditions
to Completion of the Merger (beginning on
page 82)
The completion of the merger depends upon the satisfaction or
waiver of a number of conditions, including the consummation of
the spin-off and the Leasing merger. See the information under
the caption The Merger Agreement Principal
Conditions to Completion of the Merger.
15
Termination
of the Merger Agreement (beginning on page 82)
Before the effective time of the merger, the merger agreement
may be terminated by the mutual written consent of FIS and FNF,
or by either FIS or FNF under certain specified circumstances.
For example, either FIS or FNF may terminate the merger
agreement prior to the effective time if:
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any required approval of the shareholders of FIS or stockholders
of FNF has not been obtained;
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the distribution agreement or the Agreement and Plan of Merger
entered into among FIS, its subsidiary, FIS Capital Leasing,
Inc. and FNF Leasing, which we refer to as the Leasing merger
agreement, has been terminated;
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the merger has not been completed on or before the earlier of
(x) the date that is 30 days after the closing under the
distribution agreement or (y) December 31, 2006;
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a governmental entity prohibits the merger;
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the other partys special committee of independent
directors withdraws or materially modifies its approval of the
merger agreement or its recommendation to its shareholders in a
manner adverse to the terminating party; or
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the other party breaches any of the representations or
warranties it made in the merger agreement in a manner that
would have a material adverse effect, and the breach cannot be
cured prior to December 31, 2006.
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No
Solicitation by FIS (beginning on page 78)
The merger agreement restricts the ability of FIS to:
(i) solicit, initiate or encourage the submission of any
proposal or offer to acquire or cause to be acquired in any
manner, directly or indirectly, all or substantially all of the
business, assets or capital stock of FIS (referred to as an
acquisition proposal), or take any other action to knowingly
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any
acquisition proposal or (ii) participate in or continue any
discussions or negotiations regarding, or furnish to any person
any non-public information with respect to, any acquisition
proposal. However, prior to the time, but not after, the
requisite vote of the FIS shareholders is obtained, if the FIS
board of directors determines in good faith, following
consultation with outside counsel, that such action is required
in order for such directors to comply with their fiduciary
duties under applicable law, FIS, any FIS subsidiary or any
officer, director or employee of, or any investment banker,
attorney or other advisor, representative or agent of, FIS or
any FIS subsidiary may, following the receipt of an unsolicited
acquisition proposal by FIS, participate in negotiations
regarding such acquisition proposal or furnish information
regarding FIS and its business pursuant to an appropriate
confidentiality agreement to the person making such acquisition
proposal.
Fiduciary
Duties (beginning on page 78)
Prior to (but not after) the approval of the FIS shareholders or
the FNF stockholders, as the case may be, the board of directors
of FIS or FNF, as the case may be, may withdraw or modify its
recommendation with respect to the merger agreement if it
concludes in good faith, after consultation with its independent
financial advisor and outside legal counsel, that doing so is
required in order for the board of directors to comply with its
fiduciary duties under applicable law.
No change of recommendation may be made by FIS until at least
48 hours following FNFs receipt of notice from FIS
that the FIS board of directors intends to change its
recommendation and the basis therefor. In determining whether to
make a change of recommendation, the FIS board of directors will
take into account any changes to the terms of the merger
agreement proposed by FNF and any other information provided by
FNF in response to such notice.
Material
United States Federal Income Tax Considerations (beginning on
page 70)
As one of the conditions to the consummation of the spin-off and
merger, FNF is to receive a ruling from the Internal Revenue
Service, which we refer to as the IRS, and an opinion of its
special tax advisor, Deloitte Tax LLP, together to the effect
that the spin-off and merger will be tax free under the Internal
Revenue Code, which we refer to as the Code, to FNF, FIS and to
FNFs stockholders (except that FNFs stockholders
will recognize any gain or loss attributable to the receipt of
cash in lieu of fractional shares of FNT common stock pursuant
to the spin-off and FIS
16
common stock pursuant to the merger). The FIS shareholders
(other than FNF) are not parties to the proposed transactions;
therefore, there will be no tax consequences to them as a result
of the proposed transactions.
Accounting
Treatment (beginning on page 68)
U.S. generally accepted accounting principles require that one
of the two parties to the merger be designated as the acquirer
for accounting purposes. However, Financial Accounting Standards
Board Technical Bulletin 85-5, Issues Relating to
Accounting for Business Combinations provides that if a
transaction lacks substance, it is not a purchase event and
should be accounted for based on existing carrying amounts. In
the proposed transaction, because the minority interest of FIS
does not change and in substance the only assets and liabilities
of the combined entity after the exchange are those of FIS prior
to the exchange, a change in ownership of the minority interest
has not taken place, and the exchange should be accounted for
based on the carrying amounts of FISs assets and
liabilities. FIS believes that in the merger there is no change
in the value held by the existing minority interest shareholders
and the only assets and liabilities of the combined entity after
the transaction are those owned by FIS prior to the transaction,
and therefore the merger should be accounted for at historical
cost.
The
Securities Exchange and Distribution Agreement (beginning on
page 84); The Leasing Merger Agreement (beginning on
page 81)
The securities exchange and distribution agreement provides for
the contribution of substantially all of FNFs assets
(other than its ownership interests in FIS, FNT and FNF Leasing)
and liabilities to FNT in exchange for shares of FNTs
Class A common stock, followed immediately by the
distribution by FNF to its stockholders as a dividend of all FNT
shares held by FNF. Shortly after the spin-off, pursuant to the
Leasing merger agreement, FNF Leasing will merge with and into a
subsidiary of FIS in exchange for the issuance to FNF of
307,377 shares of FIS common stock. These transactions will
leave FNF with an approximately 51.0% ownership position in FIS
as its only asset prior to the merger of FNF with and into FIS
pursuant to the merger agreement.
It is contemplated that the merger between FNF and FIS will be
completed approximately two weeks following the occurrence of
the spin-off in accordance with its terms, and that immediately
after the merger, FNT will file amended and restated articles of
incorporation that, among other things, will change the name of
FNT to Fidelity National Financial, Inc.
Risk
Factors (beginning on page 29)
In evaluating the merger, the merger agreement or the issuance
of shares of FIS common stock in the merger, you should
carefully read this proxy statement/prospectus and especially
consider the factors discussed in the section entitled
Risk Factors.
Related
Party Agreements (beginning on page 78)
At or prior to the closing under the merger agreement, FIS and
FNF will, and will cause their relevant subsidiaries to, amend
or terminate certain specified intercompany and related party
agreements and, in the case of FIS, enter into certain specified
additional agreements with FNT. Generally speaking, the
intercompany and related party agreements to which FNF is a
party will either be terminated or assigned to FNT. Certain of
the intercompany and related party agreements between FIS
and/or its
subsidiaries, on the one hand, and FNT
and/or its
subsidiaries, on the other, will require amendment to reflect
the merger as well as other changes necessary to take into
account changes in the relationship between the parties after
the merger.
Comparison
of Shareholder Rights and Corporate Governance Matters
(beginning on page 149)
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FNF. As a result of the merger, the holders of
FNF common stock will become holders of FIS common stock.
Following the merger, former FNF stockholders will have rights
as FIS shareholders different from those that they had as FNF
stockholders due to differences between the laws of the states
of incorporation and between the articles of incorporation and
bylaws of FIS and FNF.
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FIS. FIS shareholders will retain their shares
of FIS common stock and their rights will continue to be
governed by FISs articles of incorporation and bylaws and
by Georgia law.
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17
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For a copy of FISs or FNFs current articles of
incorporation or bylaws, see Where You Can Find More
Information beginning on page 1.
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Restrictions
on the Ability to Sell FIS Common Stock (beginning on
page 69)
All shares of FIS common stock you receive in connection with
the merger will be freely transferable unless you are considered
an affiliate of either FNF or FIS for the purposes
of the Securities Act at the time the proposal to adopt the
merger agreement and approve the merger is submitted to FNF
stockholders for approval, in which case you will be permitted
to sell the shares of FIS common stock you receive in the merger
only pursuant to an effective registration statement or an
exemption from the registration requirements of the Securities
Act. This proxy statement/prospectus does not register the
resale of stock held by affiliates.
18
MARKET
PRICE AND DIVIDEND INFORMATION
Historical
Market Price Data
FISs common stock is traded on the NYSE under the symbol
FIS. FNFs common stock is traded on the NYSE
under the symbol FNF.
The following table sets forth the high and low sales prices per
share of FIS and FNF common stock as adjusted for all stock
splits, as reported on the NYSE for the periods indicated:
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FNF Common
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FIS Common Stock(a)
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Stock
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High
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Low
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High
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Low
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2003
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Quarter ended March 31, 2003
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$
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N/A
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$
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N/A
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$
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25.31
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$
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22.35
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Quarter ended June 30, 2003
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N/A
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N/A
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29.50
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25.02
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Quarter ended September 30,
2003
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N/A
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N/A
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30.52
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25.59
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Quarter ended December 31,
2003
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N/A
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N/A
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35.25
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26.53
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2004
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N/A
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N/A
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Quarter ended March 31, 2004
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N/A
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N/A
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39.62
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34.59
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Quarter ended June 30, 2004
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N/A
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N/A
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41.06
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33.34
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Quarter ended September 30,
2004
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N/A
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N/A
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38.94
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35.69
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Quarter ended December 31,
2004
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N/A
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N/A
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45.67
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34.90
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2005
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N/A
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N/A
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Quarter ended March 31, 2005
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N/A
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N/A
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47.00
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30.35
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(b)
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Quarter ended June 30, 2005
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N/A
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N/A
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36.98
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30.05
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Quarter ended September 30,
2005
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N/A
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N/A
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44.71
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35.56
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Quarter ended December 31,
2005
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N/A
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N/A
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45.56
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35.50
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(c)
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2006
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Quarter ended March 31, 2006
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44.02
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36.25
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39.86
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35.15
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Quarter ended June 30, 2006
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40.16
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35.15
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43.53
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34.82
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Quarter ended September 30,
2006 (through
September 15, 2006)
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37.62
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33.50
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42.30
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36.72
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(a) |
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On February 1, 2006, Certegy merged into FIS and FIS as the
surviving entity in the merger became a separate publicly traded
company. |
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(b) |
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During the first quarter of 2005, FNF declared and paid a $10.00
special dividend. |
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(c) |
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During the fourth quarter of 2005, FNF distributed to its
stockholders 17.5% of the outstanding shares of common stock of
FNT which resulted in a reduction in its stock price of $4.06 on
the ex-dividend date. |
19
Dividend
Information
The following table presents information on dividends declared
each quarter on FIS common stock and FNF common stock,
respectively, for the periods indicated.
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FIS
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FNF
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Dividends(a)
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Dividends
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2003
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Quarter ended March 31, 2003
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$
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$
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.11
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Quarter ended June 30, 2003
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.11
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Quarter ended September 30,
2003
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.16
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Quarter ended December 31,
2003
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.16
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2004
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Quarter ended March 31, 2004
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.18
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Quarter ended June 30, 2004
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.18
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Quarter ended September 30,
2004
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.43
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(b)
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Quarter ended December 31,
2004
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|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2005
|
|
|
|
|
|
|
10.25
|
(c)
|
Quarter ended June 30, 2005
|
|
|
|
|
|
|
.25
|
|
Quarter ended September 30,
2005
|
|
|
|
|
|
|
.25
|
|
Quarter ended December 31,
2005
|
|
|
|
|
|
|
.25
|
|
2006
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2006
|
|
|
.05
|
|
|
|
.25
|
|
Quarter ended June 30, 2006
|
|
|
.05
|
|
|
|
.25
|
|
Quarter ended September 30,
2006 (through September 15, 2006)
|
|
|
.05
|
(d)
|
|
|
.25
|
(d)
|
|
|
|
(a) |
|
On February 1, 2006, Certegy merged into FIS and FIS as the
surviving entity in the merger became a separate publicly traded
company. |
|
(b) |
|
During the third quarter of 2004, FNF declared and paid a $.18
dividend and declared a $.25 dividend that was paid in the
fourth quarter on its common stock. |
|
(c) |
|
During the first quarter of 2005, FNF declared and paid a $10.00
special dividend. |
|
|
|
(d) |
|
On July 20, 2006 FNF declared a quarterly cash dividend
payable September 29, 2006 to stockholders of record as of
September 14, 2006. On July 19, 2006, FIS declared a
quarterly dividend payable September 27, 2006 to
stockholders of record as of September 14, 2006. |
The merger agreement permits each of FIS and FNF to continue to
pay its respective shareholders and stockholders its regular
quarterly cash dividend consistent with past dividend policy
until closing.
FIS began declaring cash dividends to common shareholders in the
first quarter of 2006. The declaration and payment of future
dividends is at the discretion of the FIS board of directors,
and depends on among other things, FISs investment policy
and opportunities, results of operations, financial condition,
cash requirements, future prospects, and other factors that may
be considered relevant by the FIS board of directors, including
legal and contractual restrictions. Additionally, the payment of
cash dividends may be limited by covenants in certain debt
agreements of FIS, including FISs credit facility. Under
its credit facilities, FIS is limited in the amount of dividends
it can pay to $60 million per year, plus certain other
amounts, except that dividends may not be paid if any event of
default under such facilities shall have occurred or be
continuing or would result from such payment.
Since the time of its merger with Certegy, FIS has sought to
limit dilution to FNFs stock ownership caused by option
exercises by repurchasing shares on the open market or in
privately negotiated transactions. As of September 15,
2006, FIS has repurchased 2,829,200 shares at an average
price of $36.68 under this program.
20
Under the current plan approved by FISs board of
directors, FIS is authorized to purchase an additional
170,800 shares.
In addition, FIS has agreed that it will repurchase the
approximately 1,431,000 FIS shares held by FNT and its
subsidiaries. Such purchase will be made on the business day
prior to the closing for a cash price equal to the closing
trading price of such shares on the preceding trading day.
Recent
Closing Prices and Comparative Market Price
Information
The following table presents the closing prices per share of FIS
common stock and FNF common stock, in each case based on closing
prices for those shares on the NYSE, as well as the equivalent
price per share and the equivalent total market value of shares
of FNF common stock. These prices and values are presented on
two dates:
|
|
|
|
|
April 26, 2006, the last trading day prior to the public
announcement of the proposed merger; and
|
|
|
|
|
|
September 15, 2006 the last trading day for which this
information could be calculated prior to the date of this proxy
statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIS
|
|
|
FNF
|
|
|
FNF
|
|
|
|
Common
|
|
|
Common
|
|
|
Equivalent
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock Price
|
|
|
|
(price per share)
|
|
|
(price per share)
|
|
|
(price per share)
|
|
|
April 26, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing price per share of common
stock
|
|
$
|
38.79
|
|
|
$
|
34.99
|
|
|
$
|
21.14
|
(1)
|
September 15, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing price per share of common
stock
|
|
$
|
36.60
|
|
|
$
|
42.30
|
|
|
$
|
20.02
|
(1)
|
|
|
|
(1) |
|
The FNF equivalent stock prices were calculated by multiplying
the per share price of FIS common stock on each date by the
conversion ratio of 0.547, which is calculated using
176,444,440 shares as an estimate of the number of FNF
common shares that will be outstanding at the time of the merger. |
Because the number of FIS shares to be issued as merger
consideration is fixed and will not be adjusted as a result of
changes in market price, the implied value of the merger
consideration will fluctuate with the market price of FIS common
stock. You should obtain current market quotations for the
shares of FIS common stock from a newspaper, the Internet or
your broker or banker.
21
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA
Selected
Historical Consolidated Financial Data of FIS
The following table shows selected historical consolidated
financial data for FIS. The data of FIS as of December 31,
2005, 2004 and 2003 and for each of the years in the four-year
period ended December 31, 2005, are derived from FISs
audited consolidated and combined financial statements and
related notes. The data as of December 31, 2002 and 2001
and June 30, 2006 and 2005 and for the year ended
December 31, 2001 and the six-month periods ended
June 30, 2006 and 2005 are derived from FISs
unaudited annual and interim consolidated and combined financial
statements. In the opinion of FISs management, the
unaudited annual and interim consolidated and combined financial
statements include all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of
the annual and interim consolidated and combined financial
statements. Results for the interim periods are not necessarily
indicative of the results to be expected for the full year.
Detailed historical financial information is included in the
audited consolidated and combined balance sheets as of
December 31, 2005 and 2004, and the related consolidated
and combined statements of earnings, comprehensive earnings,
stockholders equity and cash flows for each of the years
in the three-year period ended December 31, 2005 included
in FISs Annual Report on
Form 10-K
for the year ended December 31, 2005, as well as the
unaudited interim consolidated balance sheet as of June 30,
2006 and the related unaudited interim consolidated statements
of earnings, comprehensive earnings, stockholders equity and
cash flows for the six month periods ended June 30, 2006
and 2005 included in FISs Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2006. You should
read the following selected financial data together with
FISs historical consolidated and combined financial
statements, including the related notes, and the other
information incorporated by reference in this proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 1.
FISs selected historical financial data have been prepared
from the historical results of operations and bases of the
assets and liabilities of the operations transferred to FIS by
FNF and gives effect to allocations of certain corporate
expenses from FNF. FISs selected historical financial data
may not be indicative of FISs future performance and does
not necessarily reflect what its financial position and results
of operations would have been had it operated as a separate,
stand-alone entity during the periods presented. Further, as a
result of FISs acquisitions, the results in the periods
shown below may not be directly comparable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2006(2)
|
|
|
2005(2)
|
|
|
2005(2)
|
|
|
2004(2)
|
|
|
2003(2)
|
|
|
2002
|
|
|
2001(1)
|
|
|
|
(in thousands, except per share data)
|
|
|
Statement of Earnings
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Processing and services revenues
|
|
$
|
1,922,882
|
|
|
$
|
1,360,293
|
|
|
$
|
2,766,085
|
|
|
$
|
2,331,527
|
|
|
$
|
1,830,924
|
|
|
$
|
619,723
|
|
|
$
|
402,224
|
|
Cost of revenues
|
|
|
1,342,055
|
|
|
|
883,579
|
|
|
|
1,793,285
|
|
|
|
1,525,174
|
|
|
|
1,101,569
|
|
|
|
379,508
|
|
|
|
255,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
580,827
|
|
|
|
476,714
|
|
|
|
972,800
|
|
|
|
806,353
|
|
|
|
729,355
|
|
|
|
240,215
|
|
|
|
146,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses
|
|
|
271,595
|
|
|
|
219,874
|
|
|
|
422,623
|
|
|
|
432,310
|
|
|
|
331,751
|
|
|
|
144,761
|
|
|
|
92,486
|
|
Research and development costs
|
|
|
51,706
|
|
|
|
52,239
|
|
|
|
113,498
|
|
|
|
74,214
|
|
|
|
38,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
257,526
|
|
|
|
204,601
|
|
|
|
436,679
|
|
|
|
299,829
|
|
|
|
359,259
|
|
|
|
95,454
|
|
|
|
54,389
|
|
Other income (expense)
|
|
|
(90,121
|
)
|
|
|
(49,985
|
)
|
|
|
(124,623
|
)
|
|
|
14,911
|
|
|
|
(3,654
|
)
|
|
|
10,149
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes,
equity in earnings (loss) of unconsolidated entities and
minority interest
|
|
|
167,405
|
|
|
|
154,616
|
|
|
|
312,056
|
|
|
|
314,740
|
|
|
|
355,605
|
|
|
|
105,603
|
|
|
|
54,485
|
|
Income tax expense
|
|
|
64,116
|
|
|
|
59,434
|
|
|
|
116,085
|
|
|
|
118,343
|
|
|
|
137,975
|
|
|
|
39,390
|
|
|
|
20,097
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2006(2)
|
|
|
2005(2)
|
|
|
2005(2)
|
|
|
2004(2)
|
|
|
2003(2)
|
|
|
2002
|
|
|
2001(1)
|
|
|
|
(in thousands, except per share data)
|
|
|
Equity in earnings (loss) of
unconsolidated entities
|
|
|
2,092
|
|
|
|
2,244
|
|
|
|
5,029
|
|
|
|
(3,308
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
(6
|
)
|
|
|
(4,254
|
)
|
|
|
(4,450
|
)
|
|
|
(3,673
|
)
|
|
|
(14,518
|
)
|
|
|
(8,359
|
)
|
|
|
(778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
105,387
|
|
|
$
|
93,172
|
|
|
$
|
196,550
|
|
|
$
|
189,416
|
|
|
$
|
203,057
|
|
|
$
|
57,854
|
|
|
$
|
33,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net earnings per
share basic(3)
|
|
$
|
0.58
|
|
|
$
|
0.73
|
|
|
$
|
1.54
|
|
|
$
|
1.48
|
|
|
$
|
1.59
|
|
|
$
|
0.45
|
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma weighted average
shares basic
|
|
|
181,168
|
|
|
|
127,920
|
|
|
|
127,920
|
|
|
|
127,920
|
|
|
|
127,920
|
|
|
|
127,920
|
|
|
|
127,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net earnings per
share diluted(3)
|
|
$
|
0.57
|
|
|
$
|
0.73
|
|
|
$
|
1.53
|
|
|
$
|
1.48
|
|
|
$
|
1.59
|
|
|
$
|
0.45
|
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma weighted average
shares diluted
|
|
|
184,242
|
|
|
|
127,920
|
|
|
|
128,354
|
|
|
|
127,920
|
|
|
|
127,920
|
|
|
|
127,920
|
|
|
|
127,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Effective January 1, 2002, FIS adopted
SFAS No. 142 Goodwill and Other Intangible
Assets and as a result, has ceased to amortize goodwill.
Goodwill amortization in 2001 was $6.0 million. |
|
|
|
(2) |
|
Effective January 1, 2003, FIS adopted the fair value
recognition provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, using the
prospective method of adoption in accordance with
SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure, and as
a result recorded stock compensation expense of
$20.4 million, $15.4 million and $3.8 million for
the years ended December 31, 2005, 2004 and 2003,
respectively and $32.8 and $11.5 million for the six months
ended June 30, 2006 and 2005, respectively. |
|
|
|
(3) |
|
Pro forma net earnings per share are calculated, for all periods
presented, using the shares outstanding following FISs
formation in its current structure as a holding company, and the
minority interest sale on March 9, 2005, adjusted as
converted by the exchange ratio (.6396) in the merger with
Certegy. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(in thousands)
|
|
|
Balance Sheet Data
(at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
143,694
|
|
|
$
|
254,935
|
|
|
$
|
133,152
|
|
|
$
|
190,888
|
|
|
$
|
92,049
|
|
|
$
|
55,674
|
|
|
$
|
20,411
|
|
Total assets
|
|
|
7,342,785
|
|
|
|
4,068,759
|
|
|
|
4,189,021
|
|
|
|
4,002,856
|
|
|
|
2,327,085
|
|
|
|
530,647
|
|
|
|
404,566
|
|
Total long-term debt
|
|
|
2,879,313
|
|
|
|
2,656,237
|
|
|
|
2,564,128
|
|
|
|
431,205
|
|
|
|
13,789
|
|
|
|
17,129
|
|
|
|
24,980
|
|
Minority interest
|
|
|
17,712
|
|
|
|
17,595
|
|
|
|
13,060
|
|
|
|
13,615
|
|
|
|
12,130
|
|
|
|
63,272
|
|
|
|
34,385
|
|
Total equity
|
|
$
|
2,996,161
|
|
|
$
|
578,756
|
|
|
$
|
694,570
|
|
|
$
|
2,754,844
|
|
|
$
|
1,890,797
|
|
|
$
|
286,487
|
|
|
$
|
175,250
|
|
23
Selected
Historical Consolidated Financial Data of FNF
The following table shows selected historical consolidated
financial data for FNF. The data as of and for each of the five
years ended December 31, 2005 was derived from FNFs
audited consolidated financial statements. The data as of
June 30, 2006 and 2005 and for the six-month periods ended
June 30, 2006 and 2005 was derived from FNFs
unaudited interim consolidated financial statements. In the
opinion of FNFs management, the unaudited interim
consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary for
the fair presentation of the interim consolidated financial
statements. Results for the interim periods are not necessarily
indicative of the results to be expected for the full year.
Detailed historical financial information is included in the
audited consolidated balance sheets as of December 31, 2005
and 2004, and the related consolidated statements of operations,
comprehensive earnings, stockholders equity and cash flows
for each of the years in the three-year period ended
December 31, 2005 included in FNFs Annual Report on
Form 10-K
for the year ended December 31, 2005, as well as the
unaudited interim consolidated balance sheet as of June 30,
2006 and the related unaudited interim consolidated statements
of operations, comprehensive earnings and cash flows for the six
month periods ended June 30, 2006 and 2005 included in
FNFs Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2006. You should
read the following selected financial data together with
FNFs historical consolidated financial statements,
including the related notes, and the other information
incorporated by reference in this proxy statement/prospectus.
See Where You Can Find More Information beginning on
page 1.
The information presented in this section is not relevant to an
evaluation of the post-merger performance of FIS, because prior
to the merger FNF will divest itself of all assets and
liabilities other than its interest in FIS.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005(1)
|
|
|
2004(2)
|
|
|
2003(3)
|
|
|
2002
|
|
|
2001(4)(5)
|
|
|
|
(in thousands)
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
4,999,268
|
|
|
$
|
4,703,254
|
|
|
$
|
9,668,938
|
|
|
$
|
8,296,002
|
|
|
$
|
7,715,215
|
|
|
$
|
5,082,640
|
|
|
$
|
3,874,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs
|
|
|
1,769,772
|
|
|
|
1,555,192
|
|
|
|
3,224,678
|
|
|
|
2,786,297
|
|
|
|
2,465,026
|
|
|
|
1,476,430
|
|
|
|
1,187,177
|
|
Other operating expenses
|
|
|
1,095,405
|
|
|
|
840,249
|
|
|
|
1,716,711
|
|
|
|
1,599,124
|
|
|
|
1,448,133
|
|
|
|
945,829
|
|
|
|
711,151
|
|
Agent commissions
|
|
|
998,789
|
|
|
|
967,671
|
|
|
|
2,060,467
|
|
|
|
2,028,926
|
|
|
|
1,823,241
|
|
|
|
1,521,573
|
|
|
|
1,098,328
|
|
Depreciation and amortization
|
|
|
262,600
|
|
|
|
202,559
|
|
|
|
406,259
|
|
|
|
338,434
|
|
|
|
227,937
|
|
|
|
74,163
|
|
|
|
118,282
|
|
Provision for claim losses
|
|
|
238,567
|
|
|
|
197,966
|
|
|
|
480,556
|
|
|
|
311,916
|
|
|
|
287,136
|
|
|
|
179,292
|
|
|
|
134,724
|
|
Goodwill amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,155
|
|
Interest expense
|
|
|
117,605
|
|
|
|
71,535
|
|
|
|
172,327
|
|
|
|
47,214
|
|
|
|
43,103
|
|
|
|
34,053
|
|
|
|
46,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,482,738
|
|
|
|
3,835,172
|
|
|
|
8,060,998
|
|
|
|
7,111,911
|
|
|
|
6,294,576
|
|
|
|
4,231,340
|
|
|
|
3,350,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes,
minority interest and cumulative effect of a change in
accounting principle
|
|
|
516,530
|
|
|
|
868,082
|
|
|
|
1,607,940
|
|
|
|
1,184,091
|
|
|
|
1,420,639
|
|
|
|
851,300
|
|
|
|
523,721
|
|
Income tax expense
|
|
|
192,149
|
|
|
|
210,388
|
|
|
|
573,391
|
|
|
|
438,114
|
|
|
|
539,843
|
|
|
|
306,468
|
|
|
|
209,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before minority interest
and cumulative effect of a change in accounting principle
|
|
|
324,381
|
|
|
|
657,694
|
|
|
|
1,034,549
|
|
|
|
745,977
|
|
|
|
880,796
|
|
|
|
544,832
|
|
|
|
314,233
|
|
Minority interest
|
|
|
85,389
|
|
|
|
23,155
|
|
|
|
70,443
|
|
|
|
5,015
|
|
|
|
18,976
|
|
|
|
13,115
|
|
|
|
3,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before cumulative effect
of a change in accounting principle
|
|
$
|
238,992
|
|
|
$
|
634,539
|
|
|
$
|
964,106
|
|
|
$
|
740,962
|
|
|
$
|
861,820
|
|
|
$
|
531,717
|
|
|
$
|
311,185
|
|
Cumulative effect of a change in
accounting principle, net of income taxes(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
238,992
|
|
|
$
|
634,539
|
|
|
$
|
964,106
|
|
|
$
|
740,962
|
|
|
$
|
861,820
|
|
|
$
|
531,717
|
|
|
$
|
305,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005(1)
|
|
|
2004(2)
|
|
|
2003(3)
|
|
|
2002
|
|
|
2001(4)(5)
|
|
|
|
(in thousands)
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share before
cumulative effect of a change in accounting principle
|
|
$
|
1.37
|
|
|
$
|
3.67
|
|
|
$
|
5.58
|
|
|
$
|
4.33
|
|
|
$
|
5.81
|
|
|
$
|
4.05
|
|
|
$
|
2.41
|
|
Cumulative effect of a change in
accounting principle, net of income taxes, basic basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share
|
|
$
|
1.37
|
|
|
$
|
3.67
|
|
|
$
|
5.58
|
|
|
$
|
4.33
|
|
|
$
|
5.81
|
|
|
$
|
4.05
|
|
|
$
|
2.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding, basic basis
|
|
|
174,647
|
|
|
|
172,773
|
|
|
|
172,839
|
|
|
|
171,014
|
|
|
|
148,275
|
|
|
|
131,135
|
|
|
|
129,316
|
|
Diluted earnings per share before
cumulative effect of a change in accounting principle
|
|
$
|
1.32
|
|
|
$
|
3.58
|
|
|
$
|
5.43
|
|
|
$
|
4.21
|
|
|
$
|
5.63
|
|
|
$
|
3.91
|
|
|
$
|
2.34
|
|
Cumulative effect of a change in
accounting principle, net of income taxes, diluted basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings per share
|
|
$
|
1.32
|
|
|
$
|
3.58
|
|
|
$
|
5.43
|
|
|
$
|
4.21
|
|
|
$
|
5.63
|
|
|
$
|
3.91
|
|
|
$
|
2.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding, diluted basis
|
|
|
179,788
|
|
|
|
177,109
|
|
|
|
177,597
|
|
|
|
176,000
|
|
|
|
153,171
|
|
|
|
135,871
|
|
|
|
133,189
|
|
Dividends paid per share
|
|
$
|
0.50
|
|
|
$
|
10.50
|
|
|
$
|
11.00
|
|
|
$
|
.79
|
|
|
$
|
.54
|
|
|
$
|
.32
|
|
|
$
|
.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005(1)
|
|
|
2004(2)
|
|
|
2003(3)
|
|
|
2002
|
|
|
2001(4)(5)
|
|
|
|
(in thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments(6)
|
|
$
|
4,311,173
|
|
|
$
|
4,314,238
|
|
|
$
|
4,564,189
|
|
|
$
|
3,346,276
|
|
|
$
|
2,689,817
|
|
|
$
|
2,565,815
|
|
|
$
|
1,823,512
|
|
Cash and cash equivalents(7)
|
|
|
806,306
|
|
|
|
715,643
|
|
|
|
513,394
|
|
|
|
331,222
|
|
|
|
459,655
|
|
|
|
482,600
|
|
|
|
542,620
|
|
Total assets
|
|
|
14,404,379
|
|
|
|
10,687,031
|
|
|
|
11,104,617
|
|
|
|
9,270,535
|
|
|
|
7,263,175
|
|
|
|
5,245,951
|
|
|
|
4,415,998
|
|
Notes payable
|
|
|
3,519,942
|
|
|
|
3,198,432
|
|
|
|
3,217,019
|
|
|
|
1,370,556
|
|
|
|
659,186
|
|
|
|
493,458
|
|
|
|
565,690
|
|
Reserve for claim losses
|
|
|
1,186,360
|
|
|
|
1,011,865
|
|
|
|
1,113,506
|
|
|
|
1,000,474
|
|
|
|
945,237
|
|
|
|
890,148
|
|
|
|
881,089
|
|
Minority interests and preferred
stock of subsidiary
|
|
|
1,891,509
|
|
|
|
170,859
|
|
|
|
636,304
|
|
|
|
18,874
|
|
|
|
14,835
|
|
|
|
131,797
|
|
|
|
47,166
|
|
Stockholders equity
|
|
|
4,356,921
|
|
|
|
3,457,360
|
|
|
|
3,279,775
|
|
|
|
4,700,091
|
|
|
|
3,873,359
|
|
|
|
2,253,936
|
|
|
|
1,638,870
|
|
Book value per share(8)
|
|
$
|
24.72
|
|
|
$
|
19.99
|
|
|
$
|
18.84
|
|
|
$
|
27.24
|
|
|
$
|
23.50
|
|
|
$
|
17.13
|
|
|
$
|
12.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005(1)
|
|
|
2004(2)
|
|
|
2003(3)
|
|
|
2002
|
|
|
2001(4)(5)
|
|
|
Other Non-financial Data
(Unaudited)
(in whole numbers):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Orders opened by direct title
operations
|
|
|
1,679,300
|
|
|
|
1,867,000
|
|
|
|
3,615,400
|
|
|
|
3,680,200
|
|
|
|
4,820,700
|
|
|
|
3,228,300
|
|
|
|
2,635,200
|
|
Orders closed by direct title
operations
|
|
|
1,080,800
|
|
|
|
1,197,100
|
|
|
|
2,487,000
|
|
|
|
2,636,300
|
|
|
|
3,694,000
|
|
|
|
2,290,300
|
|
|
|
1,770,600
|
|
Provision for claim losses to
title insurance premiums
|
|
|
7.5
|
%
|
|
|
6.5
|
%
|
|
|
7.2
|
%
|
|
|
5.5
|
%
|
|
|
5.4
|
%
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
Title related revenue(9):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage direct
operations
|
|
|
43.4
|
%
|
|
|
45.7
|
%
|
|
|
56.0
|
%
|
|
|
54.8
|
%
|
|
|
59.7
|
%
|
|
|
55.3
|
%
|
|
|
59.0
|
%
|
Percentage agency operations
|
|
|
56.6
|
%
|
|
|
54.3
|
%
|
|
|
44.0
|
%
|
|
|
45.2
|
%
|
|
|
40.3
|
%
|
|
|
44.7
|
%
|
|
|
41.0
|
%
|
|
|
|
(1) |
|
FNFs financial results for the year ended
December 31, 2005 include in revenue and net earnings a
$318.2 million gain on sale relating to the issuance of
subsidiary stock, approximately $100.0 million in
additional income tax expense relating to the distribution to
FNFs stockholders of a 17.5% interest of FNT and
additional minority interest expense related to the minority
interest issued in FNT and FIS. (See Note A of the notes to
the historical consolidated financial statements incorporated by
reference in this proxy statement/prospectus). |
25
|
|
|
(2) |
|
FNFs financial results for the year ended
December 31, 2004 include the results of various entities
acquired on various dates during 2004, as discussed in
Note B of the notes to the FNF historical consolidated
financial statements incorporated by reference in this proxy
statement/prospectus. |
|
(3) |
|
FNFs financial results for the year ended
December 31, 2003 include the results of the acquisition of
ALLTEL Information Services, Inc. for the period from
April 1, 2003, the acquisition date, through
December 31, 2003, and include the results of operations of
various other entities acquired on various dates during 2003, as
discussed in Note B of the notes to the FNF historical
consolidated financial statements incorporated by reference in
this proxy statement/prospectus. |
|
(4) |
|
FNFs financial results for the year ended
December 31, 2001 include the results of the former
operations of Vista Information Solutions, Inc. for the period
from August 1, 2001, the acquisition date, through
December 31, 2001. In the fourth quarter of 2001, FNF
recorded certain charges totaling $10.0 million, after
applicable taxes, relating to the discontinuation of
small-ticket lease origination at FNF Capital and the wholesale
international long distance business at Micro General
Corporation. |
|
(5) |
|
During 2001, FNF recorded a $5.7 million, after-tax charge,
reflected as a cumulative effect of a change in accounting
principle, as a result of adopting Emerging Issues Task Force
No. 99-20,
Recognition of Interest Income and Impairment on Purchased
and Retained Beneficial Interests in Securitized Financial
Assets,
(EITF 99-20). |
|
|
|
(6) |
|
Investments as of December 31, 2005, 2004, 2003, 2002 and
2001 include securities pledged to secure trust deposits of
$656.0 million, $546.0 million, $448.1 million,
$474.9 million and $319.1 million, respectively.
Investments as of December 31, 2005 include securities
pledged relating to FNFs securities lending program of
$138.7 million. Investments as of June 30, 2006 and
2005 include securities pledged to secure trust deposits of
$696.6 million and $688.4 million, respectively and
include securities pledged relating to FNFs securities
lending program of $237.2 million as of June 30, 2006. |
|
|
|
(7) |
|
Cash and cash equivalents as of December 31, 2005, 2004,
2003, 2002 and 2001 include cash pledged to secure trust
deposits of $234.7 million, $195.2 million,
$231.1 million, $295.1 million and
$367.9 million, respectively. Cash and cash equivalents as
of December 31, 2005 include cash pledged relating to
FNFs securities lending program of $143.4 million.
Cash and cash equivalents as of June 30, 2006 and 2005
include cash pledged to secure trust deposits of
$322.1 million and $370.8 million, respectively. Cash
and cash equivalents as of June 30, 2006 include cash
pledged relating to FNFs securities lending program of
$243.9 million. |
|
|
|
(8) |
|
Book value per share is calculated as stockholders equity
at December 31 of each year presented divided by actual
shares outstanding at December 31 and June 30 of each
year presented. |
|
|
|
(9) |
|
Includes title insurance premiums and escrow and other title
related fees. |
Selected
Unaudited Pro Forma Condensed Combined Financial
Information
Financial Accounting Standards Board Technical
Bulletin 85-5,
Issues Relating to Accounting for Business Combinations
(FTB 85-5)
provides that in transactions when a parent company is merged
into a partially owned subsidiary and the only asset or
liability of the parent company is its investment in the
subsidiary, the transaction lacks substance and that the
transaction should be accounted for based on the carrying
amounts of the partially owned subsidiarys assets and
liabilities. FIS believes that in this merger the only assets
and liabilities of the combined entity after the transaction are
those owned by FIS prior to the transaction and, therefore, the
merger should be accounted for at historical cost.
26
The following selected unaudited pro forma condensed combined
financial information has been derived from, and should be read
in conjunction with, the Unaudited Pro Forma Condensed Combined
Financial Statements and related notes beginning on
page 161. The Unaudited Pro Forma Condensed Combined
Balance Sheet presents the historical consolidated balance sheet
of FIS as of June 30, 2006, giving effect to the merger as
if it had been consummated on that date. The Unaudited Pro Forma
Condensed Combined Statement of Continuing Operations combine
the historical consolidated statements of continuing operations
of FIS, Certegy and FNF for the six months ended June 30,
2006 and the year ended December 31, 2005, giving effect to
the mergers of FIS with Certegy and FIS with FNF as if they had
occurred on January 1, 2005. The historical consolidated
financial information has been adjusted to give effect to pro
forma events that are (1) directly attributable to the
mergers, (2) factually supportable and (3) with
respect to the statements of operations, expected to have a
continuing impact on the combined results.
For the year ended December 31, 2005 and the one month
period ended January 31, 2006, Certegy incurred costs
related to the FIS and other mergers of $11.5 million and
$81.8 million respectively, which are recorded in the
historical financial statements of Certegy and not adjusted for
in the pro forma presentation below. These transaction costs
included investment banking fees, legal and accounting fees,
change of control payments and severance payments. In addition,
FIS recorded stock compensation expense of $32.8 million in
the six months ended June 30, 2006 relating to certain
performance based stock options for which the performance
criteria were met as a result of the merger between FIS and
Certegy. No adjustment has been reflected in the pro forma
presentation below for this stock compensation expense.
The unaudited pro forma adjustments represent managements
estimates based on information available at this time. Actual
adjustments to the combined balance sheet and statement of
operations will differ, perhaps materially, from those reflected
in these Unaudited Pro Forma Condensed Combined Financial
Statements because the preliminary assumptions used to estimate
these values may change between now and the completion of the
merger.
These pro forma financial statements do not reflect adjustments
relating to the proposed Leasing merger which will occur prior
to the merger of FNF into FIS. As of June 30, 2006, FNF
Leasing has approximately $80 million in total assets and
had recorded approximately $0.7 million in pretax income
for the six month period then ended. Any adjustments made to
the pro forma combined balance sheet and pro forma combined
statement of continuing operations are not significant for
reporting purposes. These pro forma financial statements also do
not reflect any adjustments relating to FISs proposed
purchase from FNF subsidiaries of approximately 1.4 million
shares of its common stock that will occur prior to the
distribution.
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
|
Six Months
|
|
|
|
|
|
|
Ended June 30,
|
|
|
Year Ended
|
|
|
|
2006
|
|
|
December 31, 2005
|
|
|
|
(Amounts in thousands, except per share data)
|
|
Pro Forma Statement of
Continuing Operations Information
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,015,797
|
|
|
$
|
3,883,226
|
|
Income from operations
|
|
|
177,199
|
|
|
|
537,551
|
|
Net income
|
|
|
55,238
|
|
|
|
238,447
|
|
Basic earnings per share
|
|
$
|
0.29
|
|
|
$
|
1.26
|
|
Diluted earnings per share
|
|
|
0.28
|
|
|
|
1.24
|
|
Diluted average shares outstanding
|
|
|
195,267
|
|
|
|
192,245
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
June 30, 2006
|
|
|
|
|
Pro Forma Balance Sheet
Information
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
143,694
|
|
|
|
|
|
Total assets
|
|
|
7,342,785
|
|
|
|
|
|
Working Capital
|
|
|
362,934
|
|
|
|
|
|
Long-term debt
|
|
|
2,879,313
|
|
|
|
|
|
Stockholders equity
|
|
|
2,996,161
|
|
|
|
|
|
27
UNAUDITED
COMPARATIVE PER SHARE DATA
In the following tables, FIS and FNF provides for the periods
specified, income from continuing operations, cash dividends
declared and book value per common share data separately for FNF
and FIS on a historical basis, and on an unaudited pro forma
combined basis per FIS common share after giving effect to the
merger and the payment of the merger consideration. The pro
forma amounts included in the table below are presented as if
the merger had been effective for the periods presented and have
been prepared in accordance with U.S. generally accepted
accounting principles. This data should be read along with the
historical consolidated financial statements and notes thereto
of FIS and FNF, which are incorporated by reference in this
proxy statement/prospectus, and the Unaudited Pro Forma
Condensed Combined Financial Statements and accompanying
discussions and notes beginning on page 159. See also
Where You Can Find More Information beginning on
page 1.
The pro forma information is presented for illustrative purposes
only. You should not rely on the pro forma financial information
as an indication of the combined financial position or results
of operations of future periods or the results that actually
would have been realized had the entities been a single entity
during the periods presented. The combined financial information
as of and for the periods presented may have been different had
the merger actually been consummated prior to, as of and during
those periods. The FNF information presented in this section is
not relevant to an evaluation of the post-merger performance of
FIS, because prior to the merger FNF will divest itself of all
assets and liabilities other than its interest in FIS.
Comparative
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
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|
|
|
Amount per
|
|
|
|
FIS
|
|
|
FNF
|
|
|
Pro Forma
|
|
|
share of
|
|
|
|
Pro Forma(1)
|
|
|
Historical
|
|
|
Combined(2)
|
|
|
FNF(3)
|
|
|
As of and for the Six Months
Ended June 30, 2006 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share of
common stock from continuing operations
|
|
$
|
0.31
|
|
|
$
|
1.37
|
|
|
$
|
0.29
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share of
common stock from continuing operations
|
|
$
|
0.30
|
|
|
$
|
1.32
|
|
|
$
|
0.28
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share of common
stock
|
|
$
|
15.65
|
|
|
$
|
24.72
|
|
|
$
|
15.65
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
of common stock
|
|
$
|
0.10
|
|
|
$
|
0.50
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Year Ended
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share of
common stock from continuing operations
|
|
$
|
1.28
|
|
|
$
|
5.58
|
|
|
$
|
1.26
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share of
common stock from continuing operations
|
|
$
|
1.26
|
|
|
$
|
5.43
|
|
|
$
|
1.24
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share of common
stock
|
|
$
|
5.43
|
|
|
$
|
18.84
|
|
|
$
|
5.43
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
of common stock
|
|
$
|
0.20
|
|
|
$
|
11.00
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The FIS Pro Forma combined Per Share Data assumes the issuance
of approximately 63 million shares of FIS common stock to
effect the merger between FIS and Certegy Inc. which occurred on
Feb. 1, 2006 and includes the impact of FISs
recapitalization and certain other adjustments. |
|
|
|
(2) |
|
The Pro Forma combined column represents the impacts of the
merger with FNF on the results of FIS and should be read in
conjunction with the Unaudited Pro Forma Condensed Combined
Financial Information. |
|
(3) |
|
Due to the nature of this transaction the earnings of FNF do not
apply to the merger and presentation of equivalent share data is
not relevant. |
28
RISK
FACTORS
We urge you to consider carefully all of the information we
have included and incorporated by reference in this proxy
statement/prospectus before you vote. See Where You Can
Find More Information beginning on page 1. In
addition, we urge you to consider carefully the following
material risks relating to the merger and the business of the
resulting company.
Risks
Relating to the Merger
Whether
or not the merger is completed, the announcement and pendency of
the merger could cause disruptions in the businesses and share
prices of FIS and FNF, which could have an adverse effect on
their business, financial results and share
prices.
Whether or not the merger is completed, the announcement and
pendency of the merger could cause disruptions in the businesses
of FIS and FNF. Specifically:
|
|
|
|
|
current and prospective employees may experience uncertainty
about their future roles with the resulting company, which might
adversely affect FISs and FNFs ability to retain key
managers and other employees; and
|
|
|
|
the attention of management of each of FIS and FNF may be
directed toward the completion of the merger and the spin-off
under the distribution agreement between FNF and FNT, and not
their ongoing businesses.
|
Further, management believes that the announcement of the merger
may have led to arbitrage activity in the shares of FNF, FIS and
FNT, which may have made their share prices more volatile.
Because
the market price of FIS common stock fluctuates, and the number
of FIS shares FNF stockholders will receive varies depending on
the number of FNF shares outstanding at the time of the merger,
FNF stockholders cannot be certain of the aggregate value of the
merger consideration to be received in the merger.
The number of FIS shares to be issued in the merger does not
adjust based on changes in the FIS stock price and any changes
in the price of FIS common stock, or in the number of FNF shares
outstanding (due to option exercises or otherwise), will affect
the value of the shares of FIS common stock that FNF
stockholders receive in the merger. For example, if the price of
FIS common stock declines prior to completion of the merger, the
value of the stock consideration to be received by FNF
stockholders will decrease. Stock price variations could be the
result of changes in the business, operations or prospects of
FIS, general market and economic conditions, regulatory
considerations and other factors which are beyond the control of
FIS and FNF. In addition, as of August 31, 2006 the maximum
number of outstanding options to purchase FNF common stock that
could be assumed by FIS was approximately 2.8 million
options which would convert into approximately 3.1 million
options to purchase FIS common stock based on the intrinsic
value of such options on August 31, 2006. To the extent any
of these FNF options are exercised prior to the effective time
of the merger, the amount of FIS common stock received for each
FNF share will decrease.
The prices of FIS common stock and FNF common stock at the
effective time of the merger may vary from their respective
prices on the date the merger was announced, the date the merger
agreement was executed, the date of this proxy
statement/prospectus and the date of the annual meetings.
FIS and FNF are working to complete the merger as quickly as
possible. However, the time period between the shareholder votes
taken at the annual meetings and the completion of the merger
will depend upon the satisfaction or waiver of the other
conditions described in this proxy statement/prospectus, and
there is currently no way to predict with certainty how long it
will take to meet these requirements. Because the date when the
merger is completed will be later than the date of the annual
meetings, FIS shareholders and FNF stockholders will not know
the exact value of the FIS common stock that will be issued in
the merger at the time they vote on the merger proposals.
29
The
merger is subject to certain closing conditions that, if not
satisfied or waived, will result in the merger not being
completed, which may cause the market price of FIS common stock
or FNF common stock to decline.
The merger is subject to a number of conditions to closing,
including the receipt of approval of the FIS shareholders and
FNF stockholders. If any condition to the merger is not
satisfied or waived (to the extent waiver is permitted by law or
stock exchange rule) the merger will not be completed. In
addition, FIS and FNF may terminate the merger agreement under
certain circumstances. Among other things, FNF or FIS can
terminate the merger agreement if the Leasing merger agreement
or the distribution agreement is terminated, and FNF has the
right to terminate the latter agreement in its sole discretion.
If FIS and FNF do not complete the merger, the market price of
FIS common stock or FNF common stock may fluctuate to the extent
that the current market prices of those shares reflect a market
assumption that the merger will be completed. Further, whether
or not the merger is completed, FIS and FNF will also be
obligated to pay certain investment banking, financing, legal
and accounting fees and related expenses in connection with the
merger, which could negatively impact results of operations when
incurred. In addition, neither FIS nor FNF would realize any of
the expected benefits of having completed the merger. If the
merger is not completed, FIS cannot assure its shareholders and
FNF cannot assure its stockholders that additional risks will
not materialize or not materially adversely affect the business,
financial results, financial condition and stock prices of FIS
or FNF.
If FNF
stockholders who receive FIS common stock in the merger sell
that stock immediately, it could cause a decline in the market
price of FIS common stock.
All of the shares of FIS common stock to be issued in the merger
are registered with the SEC under the registration statement of
which this proxy statement/prospectus is a part, and therefore
will be immediately available for resale in the public market,
except with respect to shares issued in the merger to certain
affiliates (as that term is defined in Rule 405 of the
Securities Act). The number of shares of FIS common stock to be
issued to FNF stockholders in connection with the merger and
immediately available for resale will be substantial compared to
the number of shares of FIS common stock currently in the public
market. FNF stockholders who are not affiliates of FIS or FNF
may elect to sell the FIS shares they receive immediately after
the merger. Affiliates may immediately resell the FIS shares
they receive under Rule 144 of the Securities Act under
certain conditions, one of which limits the amount of shares to
the greater of 1% of the outstanding shares or the average
weekly volume of trading of FIS stock for the four weeks prior
to their proposed sale. As a result of future sales of such
common stock, or the perception that these sales could occur,
the market price of FIS common stock may decline and could
decline significantly before or at the time the merger is
completed, or immediately thereafter. If this occurs, or if
other holders of FIS common stock sell significant amounts of
FIS common stock immediately after the merger is completed, it
is likely that these sales would cause a decline in the market
price of FIS common stock.
If the
spin-off does not constitute a tax-free spin-off under
Section 355 of the Code or the merger does not constitute a
tax-free reorganization under Section 368(a) of the Code,
either as a result of actions taken in connection with the
spin-off or the merger or as a result of subsequent acquisitions
of stock of FNF or stock of FIS, then FNF, FIS
and/or FNF
stockholders may be responsible for payment of income
taxes.
The spin-off is conditioned upon the receipt by FNF of a ruling
from the IRS and an opinion of Deloitte Tax LLP, special tax
advisor to FNF, together to the effect that the spin-off will be
tax free to both FNF and to the stockholders of FNF under
Section 355 and related provisions of the Code. The merger
is conditioned, among other things, upon FNFs receipt of a
ruling from the IRS, or FNFs obtaining an opinion from
Deloitte Tax LLP and FISs obtaining an opinion from Weil,
Gotshal & Manges LLP, to the effect that the merger
will be treated as a tax-free reorganization within the meaning
of Section 368(a) of the Code. Although a private letter
ruling from the IRS generally is binding on the IRS, if the
factual representations or assumptions made in the letter ruling
request are untrue or incomplete in any respect, then the ruling
may not be relied upon. Any opinions will be based on, among
other things, certain assumptions and representations as to
factual matters made by FNF, FNT
and/or FIS,
which, if incorrect or inaccurate in any respect, could prevent
those opinions from being relied upon. Any opinions will not be
binding on the IRS or the courts, and the IRS or the courts may
not agree with the opinions.
30
If the spin-off were determined to be taxable, FNF estimates the
amount of tax on FNFs distribution of FNT stock could be
in the range of $150 million and possibly greater depending
on among other things the value of the FNT stock at the time of
the spin-off. If the merger were determined to be taxable, FNF
estimates the amount of tax on the transfer and retirement of
FNFs stock in FIS in the merger could be in the range of
$1 billion and possibly greater depending on among other
things the value of FISs stock at the time of the merger.
The
spin-off would become taxable to FNF pursuant to
Section 355(e) of the Code if 50% or more of the shares of
either FNF common stock (including common stock of FIS, as a
successor to FNF) or FNT common stock were acquired, directly or
indirectly, as part of a plan or series of related transactions
that included the spin-off.
Even if the spin-off otherwise qualifies as a spin-off under
Section 355 of the Code, the distribution of FNT common
stock to the FNF stockholders in connection with the spin-off
would not qualify as tax-free to FNF (or its successor after
consummation of the merger, FIS) under Section 355(e) of
the Code if 50% or more of the stock of FNF (including FIS as a
successor to FNF) or FNT is acquired as part of a plan or series
of related transactions that includes the spin-off. As a result
of the merger, approximately 49% of the stock of FIS would be
treated as having been acquired pursuant to a plan that includes
the spin-off for purposes of Section 355(e) of the Code.
To the extent that the tax-free status of the transactions is
lost, FNT will generally indemnify FIS against all tax-related
losses as a result of the loss of tax-free status. There is no
guaranty that FNT will have financial resources to satisfy any
such indemnification obligation. If the tax-free status is lost
because of any action taken by FIS or any of its subsidiaries
after the time of the spin-off (except for certain actions
specifically identified in the tax disaffiliation agreement),
FIS will be required to indemnify FNT for all tax-related losses.
FIS
may be affected by significant restrictions following the merger
with respect to certain actions that could jeopardize the
tax-free status of the spin-off or the merger. FIS could be
adversely affected if it does not achieve the expected
accounting treatment for the merger.
In order to preserve the tax-free treatment of the spin-off, a
tax disaffiliation agreement to be entered into by FNF, FNT and
FIS on or prior to the closing date under the merger agreement
will restrict FIS, for two years after the spin-off, from taking
certain actions within its control that could cause the spin-off
to be taxable without first obtaining a consent of certain
officers of FNT or obtaining an opinion from a nationally
recognized law firm or accounting firm that such action will not
cause the spin-off to be taxable to FNF under
Section 355(e) of the Code. In general, such actions would
include engaging in certain transactions involving (i) the
acquisition of FIS stock; or (ii) the issuance of shares of
FISs stock.
Because of these restrictions, FIS may be limited in the amount
of stock that it can issue to make acquisitions or raise
additional capital in the two years subsequent to the spin-off
and the merger.
As described elsewhere in this proxy statement/prospectus, FIS
believes that the merger is not the type of transaction that
would require purchase accounting under U.S. generally
accepted accounting principles. If purchase accounting is
subsequently determined to be applicable to the merger,
FISs results of operations and share price may be
adversely affected.
See The Merger Agreement Other Covenants and
Agreements Tax Disaffiliation Agreement on
page 81, Material United States Federal Income Tax
Considerations beginning on page 70 and The
Merger Accounting Treatment on page 68.
The
issuance of shares under FNFs stock option plans, which
will be assumed by FIS in the merger, will dilute existing
holders ownership interest in FIS.
In connection with the merger, FIS will assume options granted
by FNF under FNFs stock option plans if still outstanding
at the time of the merger, subject to adjustments to preserve
their
in-the-money
value. Based on their intrinsic value as of August 31,
2006, these FNF options as adjusted would represent
approximately 3.1 million FIS options. Exercise of these
options will dilute existing holders ownership interest in
FIS after the merger.
31
If the amendment and restatement of the Amended and Restated
Certegy Inc. Stock Incentive Plan is approved by FISs
shareholders, FIS will be permitted to issue under the plan up
to approximately 14,000,000 shares (not including shares
previously issued under the plan), which is 4,000,000 more
shares than could be issued under the current plan.
Additionally, on May 31, 2006 the FIS compensation
committee approved grants of up to 1,410,000 options to acquire
FIS common stock to be made to certain individuals who will be
executive officers and directors of FIS upon consummation of the
merger.
Risks
Related to FISs Operations After the Completion of the
Merger
The
anticipated benefits of combining FIS and FNF may not be
realized and the transactions may have adverse effects on
FIS.
FIS and FNF entered into the merger agreement with the
expectation that the merger would result in various benefits
including, among other things, increasing FISs long-term
ability to issue stock to fund acquisitions, increasing the
long-term ability of FIS to use equity incentives for
management, increasing FISs trading liquidity by
increasing FISs traded float and facilitating FISs
inclusion in additional market indices. Achieving the
anticipated benefits of the merger is subject to a number of
uncertainties, including the possibility that FIS will not be
able to find suitable acquisitions or that acquisitions it makes
do not increase value for stockholders, or that the increased
liquidity does not result in any improvement in the trading
price of its common stock.
In addition, the transactions under the merger agreement and the
distribution agreement may have unexpected adverse effects on
FIS. For example, it is possible that some current and potential
future customers perception of FIS has been favorably
influenced by FISs affiliation with a large, financially
strong parent company. Some customers have required performance
guarantees from FNF supporting FISs contractual
obligations. FISs relationships with these current and
potential future customers, and FISs results of
operations, could be adversely affected by the loss of this
affiliation with FNF.
After
the merger, FIS could have conflicts with FNT, and the executive
chairman of FISs board of directors and other officers and
directors could have conflicts of interest due to their
relationships with FNT.
Conflicts may arise between FNT and its subsidiaries, on the one
hand, and FIS and its subsidiaries, on the other, as a result of
these companies ongoing agreements and the nature of their
respective businesses. Among other things, FIS and certain of
its subsidiaries are parties to a variety of intercompany
agreements with FNT or FNTs subsidiaries that are expected
to continue after the merger. See The Merger
Agreement Principal Covenants and
Agreements Changes in Related Party Agreements
beginning on page 76 of this proxy statement/prospectus.
Certain of FISs executive officers and directors will be
subject to conflicts of interest with respect to such
intercompany agreements and other matters due to their
relationships with FNT or its respective subsidiaries.
Some of the FNF executive officers and directors who are
expected to become executive officers and directors of FIS in
connection with the merger own substantial amounts of FNT stock
and stock options because of their relationships with FNF and
FNT prior to the merger. Such ownership could create or appear
to create potential conflicts of interest when directors and
officers of FIS are faced with decisions that involve FNT or any
of its respective subsidiaries. William P. Foley, II, Alan
L. Stinson and Brent B. Bickett will become executive officers
of FIS. Each of these individuals beneficially owns shares of
FNT common stock.
Mr. Foley, who will become FISs Executive Chairman in
connection with the merger, is currently the Chief Executive
Officer and Chairman of the board of directors of FNF and is
also Chairman of the board of directors of FNT and will become
the Chief Executive Officer of FNT. Mr. Stinson and
Mr. Bickett will also become officers of FNT. As an officer
and director of these companies, each of these individuals will
have obligations to FIS as well as to FNT and will have
conflicts of interest with respect to matters potentially or
actually involving or affecting FIS or its subsidiaries and FNT
or its subsidiaries.
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Matters that could give rise to conflicts between FIS or its
subsidiaries and FNT or its subsidiaries include, among other
things:
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FISs past and ongoing contractual relationships with FNT
and its subsidiaries, including intercompany agreements and
other arrangements with respect to the administration of tax
matters, employee benefits, indemnification, and other matters;
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the quality and pricing of services that FIS has agreed to
provide to FNT subsidiaries or that those entities have agreed
to provide to FIS; and
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business opportunities arising for either FIS or FNT or their
respective subsidiaries, that could be pursued by either FIS or
by FNT, or one or more of their respective subsidiaries.
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After the merger, FIS will seek to manage these potential
conflicts through dispute resolution and other provisions of its
agreements with FNT and its respective subsidiaries and through
oversight by independent members of FISs board of
directors. However, there can be no assurance that such measures
will be effective or that FIS will be able to resolve all
potential conflicts with FNT, or that the resolution of any such
conflicts will be no less favorable to FIS than if it were
dealing with an unaffiliated third party.
FIS
may lack adequate oversight since the chairman of the board of
directors and chief executive officer of FNT will also be the
executive chairman of FIS.
In connection with the proposed transactions, Mr. Foley
will become executive chairman of the board of directors of FIS.
Mr. Foley will also be the chairman of the board of
directors and chief executive officer of FNT. As an officer and
director of each of these companies, he will have obligations to
FIS as well as FNT and may have conflicts of time with respect
to matters potentially or actually involving or affecting FIS.
As executive chairman, it is expected that Mr. Foley will
devote no more than one-half of his time to matters relating to
FIS. Although FIS already has a full management team, if
Mr. Foleys duties as executive chairman of the board
of directors of FIS require more time than he is able to allot,
then his oversight of the activities of FIS could be diminished
and the effective management of FIS could be adversely affected.
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CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the information contained in, or incorporated by
reference into, this proxy statement/prospectus contains
forward-looking statements that involve risks and uncertainties,
including those risk and uncertainties described in the section
entitled Risk Factors. In many cases, you can
identify forward-looking statements by terminology such as
may, should, expects,
plans, anticipates,
believes, estimates,
predicts, potential or
continue, or the negative of these terms and other
comparable terminology. Actual results could differ materially
from those anticipated in these statements as a result of a
number of factors, including those set forth in the section of
this proxy statement/prospectus entitled Risk
Factors or elsewhere in this proxy statement/prospectus or
in FISs or FNFs other filings with the SEC,
including their annual reports on
Form 10-K
for the year ended December 31, 2005 filed with the SEC and
incorporated by reference in this proxy statement/prospectus.
Except as may be required by law, FIS and FNF are not under any
obligation (and expressly disclaim any such obligation) to
update or alter their forward-looking statements, whether as a
result of new information, future events or otherwise. You
should carefully consider the possibility that actual results
may differ materially from forward-looking statements in this
proxy statement/prospectus.
34
THE FIS
ANNUAL MEETING
General
This proxy statement/prospectus includes an information
statement which is being furnished to shareholders of FIS in
connection with the FIS Annual Meeting and at any adjournment of
the meeting. In addition, this proxy statement/prospectus is
being provided to FNF stockholders as part of a solicitation of
proxies by the FNF board of directors for use at the FNF Annual
Meeting and at any adjournment thereof. FISs board of
directors is not soliciting proxies from the FIS shareholders in
connection with the FIS Annual Meeting on account of the fact
that a quorum will be present by virtue of FNFs 51.3%
interest in the outstanding shares of FIS.
FNF and its subsidiaries currently own 97,646,500 shares of
FIS, representing ownership of approximately 51.3% of the
capital stock of FIS. FNF intends to vote all of its FIS shares
(and to cause its subsidiaries to vote all of their FIS shares)
in connection with the proposals submitted for the vote of FIS
shareholders at the FIS Annual Meeting, provided that, with
respect to the adoption of the merger agreement, FNF receives
the requisite affirmative vote of its stockholders at the FNF
Annual Meeting. As a result, the vote by FNF alone will suffice
for the requisite minimum number of votes necessary with respect
to each of the proposals at the FIS Annual Meeting.
Notwithstanding FNFs vote of its controlling interest in
FIS, the other shareholders of FIS are invited to attend the FIS
Annual Meeting, at which they will have the opportunity to vote.
FIS shareholders should be aware that they are not entitled to
assert dissenters rights of appraisal with respect to
their FIS shares.
FISs board of directors has approved the merger and the
nomination of the directors for election at the FIS Annual
Meeting, and has confirmed the FIS audit committees
retention of the independent auditors for fiscal year 2006. The
board of directors recommendation to shareholders with
respect to the issuance of shares of FIS common stock pursuant
to the merger agreement, the amendment of the Amended and
Restated Certegy Inc. Stock Incentive Plan, the approval of the
FIS Employee Stock Purchase Plan, the approval of the FIS Annual
Incentive Plan, the election of directors and the ratification
of the appointment of FISs independent registered public
accounting firm for its fiscal year ending December 31,
2006 are specifically indicated in each of the proposals
discussed below.
Date,
Time and Place of the FIS Annual Meeting
The 2006 FIS Annual Meeting will be held on October 23,
2006, at 10:00 a.m., local time, in the Peninsular Auditorium at
601 Riverside Avenue, Jacksonville, Florida 32204.
Purposes
of the FIS Annual Meeting
At the meeting, shareholders will vote upon the following
proposals:
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To approve the issuance of shares of FIS common stock to the
stockholders of FNF pursuant to the Agreement and Plan of
Merger, dated as of June 25, 2006, as amended and restated
as of September 18, 2006, between FIS and FNF, which
agreement provides for the merger of FNF with and into FIS with
FIS being the surviving corporation;
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To approve the Amended and Restated Certegy Inc. Stock Incentive
Plan, which will, among other things, increase the total number
of shares of common stock available for issuance under the
current stock incentive plan by an additional 4,000,000 shares
and increase the limits on the number of individual awards that
may be granted to any individual under the plan;
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To approve the FIS Employee Stock Purchase Plan;
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To approve the FIS Annual Incentive Plan;
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To elect four Class I directors to serve until the 2009 FIS
Annual Meeting of shareholders;
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To ratify the appointment of KPMG LLP as FISs independent
registered public accounting firm for its fiscal year ending
December 31, 2006; and
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To transact such other business as may properly be brought
before the FIS Annual Meeting.
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Record
Date; Shares Entitled to Vote; Outstanding Shares
The record date for the FIS Annual Meeting was
September 11, 2006. This means that you must have been a
shareholder of record of FIS common stock at the close of
business on that date in order to vote at the FIS Annual
Meeting. You are entitled to one vote for each share of FIS
common stock you own on the record date. On FISs record
date, FIS had 190,412,587 shares of FIS common stock
outstanding.
Quorum
and Voting Rights
Proxies are not being solicited from the shareholders of FIS
with respect to the FIS Annual Meeting. FNFs ownership of
a majority of the outstanding common shares of FIS establishes
the presence of a quorum at the meeting. Approval of
Proposal 1 relating to the issuance of shares of FIS common
stock pursuant to the merger agreement requires an affirmative
vote of a majority of the votes cast at the FIS Annual Meeting,
approval of Proposal 2 relating to the amendment of the
Amended and Restated Certegy Inc. Stock Incentive Plan requires
an affirmative vote of a majority of the votes cast at the FIS
Annual Meeting, approval of Proposal 3 relating to the
approval of the FIS Employee Stock Purchase Plan requires an
affirmative vote of a majority of the votes cast at the FIS
Annual Meeting, approval of Proposal 4 relating to the
approval of the FIS Annual Incentive Plan requires an
affirmative vote of a majority of the votes cast at the FIS
Annual Meeting, approval of Proposal 5 relating to the
election of directors requires an affirmative vote of a
plurality of the votes cast at the FIS Annual Meeting, and
approval of Proposal 6 relating to ratification of
FISs independent auditors as well as any other proposal
that may be properly presented at the FIS Annual Meeting
requires an affirmative vote of a majority of the votes cast at
the FIS Annual Meeting. FNF intends to vote its FIS shares in
connection with each of the proposals which alone will suffice
for the requisite minimum number of shares necessary with
respect to each of the proposals.
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ITEM 1
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THE
ISSUANCE OF SHARES OF FIS COMMON STOCK PURSUANT TO THE
MERGER AGREEMENT
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As discussed elsewhere in this proxy statement/prospectus, FIS
shareholders are being asked to vote upon a proposal to approve
the issuance of shares of FIS common stock to the stockholders
of FNF pursuant to the merger agreement. You are urged to read
the merger agreement, which is attached to this proxy
statement/prospectus as Annex A.
The FIS board of directors recommends that FIS shareholders
vote FOR the issuance of FIS common stock pursuant to the
merger agreement.
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ITEM 2
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AMENDMENT
OF AMENDED AND RESTATED CERTEGY INC. STOCK INCENTIVE
PLAN
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As discussed elsewhere in this proxy statement/prospectus, FIS
shareholders are being asked to vote to approve the amendment of
the Amended and Restated Certegy Inc. Stock Incentive Plan,
which amendment will, among other things, increase the total
number of shares of common stock available for issuance under
the current stock incentive plan by an additional
4,000,000 shares and increase the limits on the number of
individual awards that may be granted to any individual under
the plan. You are also urged to read the Amended and Restated
Certegy Inc. Stock Incentive Plan, which is attached to this
proxy statement/prospectus as Annex B.
The FIS board of directors recommends that FIS shareholders
vote FOR the amendment to the Amended and Restated Certegy
Inc. Stock Incentive Plan.
ITEM 3
APPROVE THE FIS EMPLOYEE STOCK PURCHASE PLAN
As discussed elsewhere in this proxy statement/prospectus, FIS
shareholders are being asked to vote to approve the FIS Employee
Stock Purchase Plan. You are also urged to read the FIS Employee
Stock Purchase Plan, which is attached to this proxy
statement/prospectus as Annex C.
The FIS board of directors recommends that FIS shareholders
vote FOR the approval of the FIS Employee Stock Purchase
Plan.
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ITEM 4
APPROVE THE FIS ANNUAL INCENTIVE PLAN
As discussed elsewhere in this proxy statement/prospectus, FIS
shareholders are being asked to vote to approve the FIS Annual
Incentive Plan. You are also urged to read the FIS Annual
Incentive Plan, which is attached to this proxy
statement/prospectus as Annex D.
The FIS board of directors recommends that FIS shareholders
vote FOR the approval of the FIS Annual Incentive Plan.
ITEM 5
APPROVE ELECTION OF DIRECTORS
As discussed elsewhere in this proxy statement/prospectus, FIS
shareholders are being asked to vote in favor of the election of
four Class I directors to serve until the 2009 FIS Annual
Meeting of shareholders. You should carefully read this proxy
statement/prospectus in its entirety for more detailed
information concerning the election of directors.
The FIS board of directors recommends that FIS shareholders
vote FOR the election of all 4 nominees.
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ITEM 6
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APPROVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
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As discussed elsewhere in this proxy statement/prospectus, FIS
shareholders are being asked to vote in favor of the
ratification of the appointment of KPMG LLP as FISs
independent registered public accounting firm for its fiscal
year ending December 31, 2006.
The FIS board of directors recommends that FIS shareholders
vote FOR the ratification of KPMG LLP as FISs
independent registered public accountants for fiscal 2006.
Voting by
FISs Directors and Executive Officers
As of the record date for the FIS Annual Meeting, FNFs
directors and executive officers had the right to vote
approximately 0.33 million shares of the then
outstanding FIS common stock at the FIS Annual
Meeting. As of the record date for the FIS Annual Meeting,
these shares represented less than 0.1% of the FIS common
stock outstanding and entitled to vote at the meeting.
Voting at
the Meeting
As proxies are not being solicited, all voting will be done in
person at the FIS Annual Meeting. Ballots will be available to
all shareholders in attendance at the meeting provided that,
with respect to shareholders whose FIS shares are held in
street name, those shareholders must present
appropriate proof of beneficial ownership of their FIS shares
upon entrance to the meeting in order to be able to vote their
shares at the meeting.
Other
Voting Matters
Electronic
Access to Proxy Materials
This proxy statement/prospectus is available on the SECs
Internet site at www.sec.gov or on FISs Internet site at
www.fidelityinfoservices.com.
37
THE FNF
ANNUAL MEETING
General
This proxy statement/prospectus is being provided to FNF
stockholders as part of a solicitation of proxies by the FNF
board of directors for use at the FNF Annual Meeting and at any
adjournment thereof. This proxy statement/prospectus provides
FNF stockholders with the information they need to know to be
able to vote or instruct their votes to be cast at the FNF
Annual Meeting.
Date,
Time and Place of the FNF Annual Meeting
The FNF Annual Meeting will be held on October 23, 2006, at
9:00 a.m., local time, in the Peninsular Auditorium at 601
Riverside Avenue, Jacksonville, Florida 32204.
Purposes
of the FNF Annual Meeting
At the FNF Annual Meeting, FNF stockholders will vote upon the
following proposals:
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To adopt the Agreement and Plan of Merger, dated June 25,
2006 as amended and restated as of September 18, 2006 and
approve the merger provided for therein, pursuant to which FNF
will be merged with and into FIS, with FIS being the surviving
corporation.
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Election of two directors to serve until the 2009 FNF Annual
Meeting.
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Ratification of the appointment of KPMG LLP as FNFs
independent registered public accounting firm for its fiscal
year ending December 31, 2006.
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Any other matters as may properly come before the meeting and
any adjournment or postponement of the meeting.
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If the proposal relating to the adoption of the merger agreement
and approval of the merger receives the requisite number of
affirmative votes, it is expected that the merger would be
consummated shortly after the satisfaction or waiver of the
other conditions to the consummation of the merger. In that
event, and if the proposal relating to the election of directors
receives the requisite number of affirmative votes, the newly
elected directors would serve only until such time as the merger
is consummated due to the fact that upon the consummation of the
merger, FNF will cease to exist as a separate entity.
Record
Date; Shares Entitled to Vote; Outstanding Shares
The record date for the meeting for FNF stockholders was
September 11, 2006. This means that you must have been a
holder of record of FNFs common stock at the close of
business on that date in order to vote at the FNF Annual
Meeting. You are entitled to one vote for each share of FNF
common stock you own. On FNFs record date,
176,603,760 shares of FNF common stock were issued and
outstanding.
A complete list of FNF stockholders entitled to vote at the FNF
Annual Meeting will be available for inspection at the executive
offices of FNF during regular business hours for at least five
business days before the annual meeting.
Quorum
and Voting Rights
A quorum of stockholders is necessary to hold a valid annual
meeting of FNF. A majority of all outstanding shares of FNF
entitled to vote and present, in person or by proxy, at the
annual meeting constitutes a quorum. All shares of FNF common
stock represented at the annual meeting, including abstentions
and broker non-votes, will be counted for purposes of
determining whether a quorum is present. Once a share is
represented for any purpose at the
38
FNF Annual Meeting, it will be deemed present for quorum
purposes for the remainder of the meeting (including any meeting
resulting from an adjournment of the annual meeting).
The adoption of the merger agreement and approval of the merger
require the affirmative vote of a majority of the outstanding
shares of FNF common stock entitled to vote at the FNF Annual
Meeting.
For a discussion of how broker non-votes and abstentions will
affect the outcome of the vote on these proposals, see
Voting; Proxies Voting
Shares Held in Street Name beginning on page 40
and Voting; Proxies Abstaining
from Voting beginning on page 40.
ITEM 1
THE MERGER
As discussed elsewhere in this proxy statement/prospectus, FNF
stockholders are being asked to adopt the merger agreement and
approve the merger, pursuant to which FNF will be merged with
and into FIS, with FIS being the surviving corporation. You
should read carefully this proxy statement/prospectus in its
entirety for more detailed information concerning the merger
agreement and the merger. In particular, you are directed to the
merger agreement, which is attached to this proxy
statement/prospectus as Annex A.
The FNF board of directors recommends that FNF stockholders
vote FOR the adoption of the merger agreement and approval
of the merger and your proxy will be so voted unless you specify
otherwise.
ITEM 2
APPROVE ELECTION OF DIRECTORS
As discussed elsewhere in this proxy statement/prospectus, FNF
stockholders are being asked to vote upon the election of two
directors to serve until the 2009 FNF Annual Meeting. You should
carefully read this proxy statement/prospectus in its entirety
for more detailed information concerning the election of
directors.
The FNF board of directors recommends that FNF stockholders
vote FOR the election of both nominees.
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ITEM 3
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APPROVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
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As discussed elsewhere in this proxy statement/prospectus, FNF
stockholders are being asked to vote upon the ratification of
the appointment of KPMG LLP as FNFs independent registered
public accounting firm for its fiscal year ending
December 31, 2006.
The FNF board of directors recommends that FNF stockholders
vote FOR the ratification of KPMG LLP as FNFs
independent registered public accountants for fiscal 2006.
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ITEM 4
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APPROVE
ADJOURNMENTS OF THE ANNUAL MEETING, IF NECESSARY, TO PERMIT
FURTHER SOLICITATION OF PROXIES
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FNF stockholders may be asked to vote on a proposal to adjourn
the annual meeting, if necessary, to permit further solicitation
of proxies if there are not sufficient votes at the time of the
annual meeting to approve the above proposal. See the discussion
regarding adjournments below in
Adjournments beginning on page 42.
The FNF board of directors recommends that FNF stockholders
vote FOR the proposal to adjourn, if necessary, the FNF
Annual Meeting.
Voting by
FNFs Directors and Executive Officers
As of the record date for the FNF Annual Meeting, FNFs
directors and executive officers had the right to vote
approximately 6.27 million shares of the then
outstanding FNF common stock at the FNF Annual Meeting. As of
the record date for the FNF Annual Meeting, these shares
represented less than 3.6% of the FNF common stock outstanding
and entitled to vote at the meeting.
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Voting;
Proxies
You may vote in person at the FNF Annual Meeting or by proxy. We
recommend you vote by proxy even if you plan to attend the FNF
Annual Meeting. If you vote by proxy, you may change your vote
if you attend the annual meeting. If you own FNF common stock in
your own name, you are an owner of record. This
means that you may use the enclosed proxy card(s) to tell the
persons named as proxies how to vote your shares. If you
properly complete, sign and date your proxy card(s), or vote by
telephone or over the Internet, your proxy will be voted in
accordance with your instructions. The named proxies will vote
all shares at the meeting that have been properly voted (whether
by Internet, telephone or mail) and not revoked. If you sign and
return your proxy card(s) but do not mark your card(s) to tell
the proxies how to vote your shares on each proposal, your proxy
will be voted FOR each of the proposals presented.
If your FNF shares are held in street name through a
broker, bank or other nominee, please follow the voting
instructions provided by your broker, bank or other nominee.
Also, see Voting Shares Held in Street
Name below.
Voting
Shares Held in Street Name
Generally, a broker, bank or other nominee may only vote the
common stock that it holds in street name for you in
accordance with your instructions. However, if your broker has
not received your instructions, your broker has the discretion
to vote on certain matters that are considered routine.
If you wish to vote on the proposal to adopt the merger
agreement and approve the merger, you must provide instructions
to your broker. If you do not provide your broker with
instructions, your broker will not be authorized to vote on the
proposal to adopt the merger agreement and approve the merger.
This broker non-vote will have the same effect as a vote against
the proposal.
If you wish to vote on the proposal to approve adjournments of
the FNF Annual Meeting, you should provide instructions to your
broker. If you do not provide instructions to your broker, your
broker will not be authorized to vote on any proposal to adjourn
the annual meeting solely relating to the solicitation of
proxies to adopt the merger agreement and approve the merger.
Abstaining
from Voting
Your abstention from voting will have the same effect as a vote
against the proposals summarized above.
How to
Vote
You have three voting options:
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Internet: You can vote over the Internet at
the Internet address shown on your proxy card(s). Internet
voting is available 24 hours a day. If you vote over the
Internet, do not return your proxy card(s).
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Telephone: You can vote by telephone by
calling the toll-free number on your proxy card(s). Telephone
voting is available 24 hours a day. An
easy-to-follow
voice prompt allows you to vote your shares and confirm that
your instructions have been properly recorded. If you vote by
telephone, do not return your proxy card(s).
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Mail: You can vote by mail by simply signing,
dating and mailing your proxy card(s) in the postage-paid
envelope included with this proxy statement/prospectus.
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A number of brokerage firms and banks participate in a program
that also permits stockholders whose shares are held in
street name to direct their vote over the Internet
or by telephone. This option, if available, will be reflected in
the voting instructions from the brokerage firm or bank that
accompany this proxy statement/prospectus. If your shares are
held in an account at a brokerage firm or bank that participates
in such a program, you may direct the vote of these shares by
the Internet or telephone by following the voting instructions
enclosed
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with the proxy form from the brokerage firm or bank. Directing
the voting of your shares will not affect your right to vote in
person if you decide to attend the FNF Annual Meeting; however,
you must first obtain a signed and properly executed legal proxy
from your broker, bank or other nominee to vote your shares held
in street name at the annual meeting. Requesting a
legal proxy will automatically cancel any voting directions you
have previously given to your broker, bank or other nominee by
the Internet or by telephone with respect to your shares.
Revoking
Your Proxy
You can revoke your proxy at any time before its exercise by:
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sending a written notice to the Corporate Secretary of FNF, at
601 Riverside Avenue, Jacksonville, Florida 32204, bearing a
date later than the date of the proxy, that is received prior to
the FNF Annual Meeting and states that you revoke your proxy;
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voting again over the Internet or by telephone;
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signing another proxy card(s) bearing a later date and mailing
it so that it is received prior to the annual meeting; or
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attending the annual meeting and voting in person, although
attendance at the annual meeting will not, by itself, revoke a
proxy.
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If your shares are held in street name, you will
need to contact your broker, bank or other nominee to revoke
your proxy.
Other
Voting Matters
Voting
in Person
If you plan to attend the FNF Annual Meeting and wish to vote in
person, we will give you a ballot at the annual meeting.
However, if your shares are held in street name, you
must first obtain a legal proxy authorizing you to vote the
shares in person, which you must bring with you to the annual
meeting.
Electronic
Access to Proxy Materials
This proxy statement/prospectus is available on the SECs
Internet site at www.sec.gov or on FNFs Internet site at
www.fnf.com.
Proxy
Solicitations
FNF is soliciting proxies for the FNF Annual Meeting from FNF
stockholders. FNF will bear the entire cost of soliciting
proxies from FNF stockholders, except that FIS and FNF will
share equally the expenses incurred in connection with the
filing of the registration statement of which this proxy
statement/prospectus forms a part with the SEC and the printing
and mailing of this proxy statement/prospectus. In addition to
this mailing, FNFs directors, officers and employees (who
will not receive any additional compensation for their services)
may solicit proxies personally, electronically or by telephone.
FNF and its proxy solicitor will also request that banks,
brokerage houses and other custodians, nominees and fiduciaries
send proxy materials to the beneficial owners of FNF common
stock and will, if requested, reimburse the record holders for
their reasonable
out-of-pocket
expenses in doing so. The extent to which these proxy-soliciting
efforts will be necessary depends upon how promptly proxies are
submitted. You should promptly vote by telephone or over the
Internet or submit your completed proxy card(s) by mail.
FNF Stockholders should not submit any stock certificates
with their proxy card(s).
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Adjournments
If a quorum is not present at the FNF Annual Meeting, the
chairman of the meeting will have the authority to adjourn the
annual meeting to solicit additional proxies without the
approval of stockholders. If a quorum is present at the FNF
Annual Meeting but there are not sufficient votes at the time of
the annual meeting to approve all of the other proposals,
holders of FNF common stock may also be asked to vote on a
proposal to approve the adjournment of the annual meeting to
permit further solicitation of proxies. Approval by a majority
of the votes cast on the proposal to adjourn the meeting will be
required. In addition, if the new date, time or place of the new
meeting is not given at the adjourned meeting or if after the
adjournment a new record date is fixed for an adjourned meeting,
which it must be if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting,
notice of the adjourned meeting must be given to each
shareholder of record entitled to vote at such annual meeting.
Assistance
If you need assistance in completing your proxy card(s) or have
questions regarding FNFs Annual Meeting, please contact
Morrow & Co. at (800) 662-5200, or write to
Morrow & Co. at 470 West Avenue, Stamford, CT 06902.
42
THE
MERGER
The following discussion contains material information
pertaining to the merger. This discussion is subject and
qualified in its entirety by reference to the merger agreement
and the related documents attached as annexes to this proxy
statement/prospectus. We urge you to read the entirety of those
documents as well as the discussion in this proxy
statement/prospectus.
Structure
of the Merger
FIS and FNF have reached an agreement for FNF to merge with and
into FIS. Upon completion of the merger, the separate corporate
existence of FNF will cease and FIS will continue as the
surviving corporation. At the same time that it entered into the
merger agreement with FIS, FNF entered into the distribution
agreement with FNT, under which FNF has agreed to transfer its
interests in certain companies and certain other assets and
liabilities to FNT in exchange for shares of FNT Class A
common stock and the assumption by FNT of certain liabilities of
FNT (as provided in the distribution agreement) prior to the
merger of FNF into FIS. Following the contribution of assets by
FNF to FNT, FNF will convert all of its shares of FNT
Class B common stock into shares of FNT Class A common
stock. Immediately thereafter, FNF will distribute the converted
shares, together with the shares of FNT Class A common
stock transferred to FNF by FNT, to the holders of the
outstanding capital stock of FNF. We refer to this distribution
as the spin-off. Upon completion of the spin-off, FNF will have
no assets other than its ownership of FIS common stock, its
ownership of FNF Leasing (which, subject to satisfaction of the
conditions in the Leasing merger agreement, will merge with and
into a subsidiary of FIS shortly after the spin-off) and its
rights under certain agreements entered into pursuant to the
distribution agreement. Prior to the effective time of the
merger, FIS will amend and restate the Amended and Restated
Certegy Inc. Stock Incentive Plan to increase the total number
of shares available by an additional 4,000,000 shares. It is
contemplated that the merger would be completed twelve business
days, approximately two weeks, following the spin-off.
The boards of directors of FIS and FNF both believe that the
merger will provide benefits to their respective shareholders
and stockholders and that the merger will be in the best
interests of their respective companies, shareholders and
stockholders. To review the reasons for the merger in greater
detail, see The Merger FISs Reasons for
the Merger and Recommendation of FISs board of
directors beginning on page 51 and The
Merger FNFs Reasons for the Merger and
Recommendation of FNFs board of directors beginning
on page 52.
We urge you to read carefully the entire merger agreement
attached to this proxy statement/prospectus as
Annex A because it sets forth the terms of and is
the principal legal document governing the merger.
Background
of the Merger
FNF completed the formation of Old FIS and contributed assets to
it in early 2005 in connection with the sale of a 25% interest
in Old FIS to a group of private equity investors led by Thomas
H. Lee Partners and Texas Pacific Group. The principal
businesses contributed were FNFs bank core processing and
mortgage processing business, its lender services businesses and
its real estate information businesses. In February 2006, Old
FIS merged into a subsidiary of Certegy in a transaction in
which FNF and the private equity investors received an aggregate
of 67.4% of the common stock of Certegy. Certegy was renamed
Fidelity National Information Services, Inc. Prior to the merger
of Old FIS and Certegy, FNF distributed a minority interest in
FNT, the holding company for FNFs title insurance
operations, to the stockholders of FNF in a taxable
distribution. This distribution resulted in FNT becoming
publicly traded on the NYSE.
Following the Certegy merger and the establishment of public
markets for FNT common stock and FIS common stock, FNF
management perceived that the public market price for FNF common
stock was not adequately reflecting the aggregate fair value of
FNFs businesses, including FNFs majority stakes in
both FNT and FIS. FNF believed that one possible factor
contributing to this discount, among others, was FNFs
requirement that, for so long as FNF retained significant
ownership positions in FNT and FIS, FNF maintain a majority
ownership position in each company in order to consolidate
financial results within FNF for accounting purposes, which
limited the ability of each of FNT and FIS to use its common
stock as currency for acquisitions.
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By early April 2006, senior management of FNF had concluded that
the public markets had discounted the value of FNF stock in
relation to the aggregate fair value of FNFs parts. FNF
and senior management began discussing the potential
inefficiencies in FNFs holding company structure and how
the market valuation of FNFs assets might be maximized in
a corporate restructuring. Senior management recognized a number
of factors in its decision to investigate the possibility of a
restructuring transaction, including that:
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FNFs majority ownership of FIS and FNT may limit the
public float, the number of eligible stockholders, the trading
liquidity and, therefore, the market value of FIS and FNT common
stock; and
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FNFs need to maintain its majority ownership positions in
FIS and FNT may limit the ability of each of FIS and FNT to use
its common stock as currency for acquisitions and, therefore,
may constrain FIS and FNT from pursuing attractive acquisition
opportunities.
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Senior management also recognized the possibility that
eliminating the FNF holding company structure and making FIS and
FNT independent companies would simplify the profile of the FNF
family of companies, eliminate the discount surrounding FNF
common stock, provide more valuable currencies for future
acquisitions for both FIS and FNT and more fully realize the
underlying value of FIS and all of the assets of FNF.
Accordingly, senior management of FNF, in consultation with Bear
Stearns & Co. Inc., began studying potential
transactions that might mitigate or eliminate the perceived
structural inefficiencies described above. FNF believed that any
such transaction would have to be subject to at least two
constraints: (i) that it not cause a taxable transaction
for FNF or its stockholders and (ii) that it not trigger
purchase accounting rules that would require FNT or FIS (or a
successor company in any transaction) to recognize significant
goodwill in connection with any sale or transfer of assets.
At the regular quarterly meeting of the FNF board of directors
on April 26, 2006, senior management proposed to the FNF
board of directors a plan for a three-step transaction that
would result in FIS and FNT becoming independent entities held
entirely by public stockholders. In the first step, FNF would
transfer its specialty insurance businesses, its interest in
Sedgwick CMS Holdings, Inc. and certain other assets to FNT in
exchange for stock of FNT. In the second step, FNF would spin
off its entire ownership of FNT to FNF stockholders in a
tax-free distribution, effectively leaving FNF with its
ownership in FIS as its only asset. In the third step, FNF would
merge with FIS and stockholders of FNF would receive shares of
FIS common stock in a tax-free transaction, thus making FIS
independent of FNF ownership. The FNF board of directors
approved pursuing these transactions, subject to further
analysis of the value of the proposed transactions to FNF and
its stockholders and evaluation and negotiation of the
transactions by the special committee of the FNF board of
directors established at the same meeting, as discussed below.
In authorizing the pursuit of this plan, the FNF board of
directors considered, among other things, the potential for the
proposed transactions to eliminate or mitigate the holding
company discount to the FNF stock price, discussed above, the
need for FNT and FIS to pursue their own independent business
and acquisition strategies and the projected impact of the
transactions on FNT and FIS common stock valuations.
At the April 26, 2006 meeting, the FNF board of directors
did not set or propose any definitive financial terms for either
the asset sale to FNT or the merger with FIS. As part of the
public announcement of the proposed plan, FNF did indicate that
it expected to propose a total consideration range of
$1.0 billion to $1.25 billion for the assets to be
transferred to FNT. FNF also indicated that the conversion ratio
of FIS common stock for FNF common stock would be based on a
number of factors, including the market value of FIS, FNFs
controlling ownership position in FIS, the potential benefit of
the increased float of FIS for FIS shareholders and the ability
of FIS, after the proposed merger with FNF, to issue stock for
acquisitions without the risk of affecting FNFs majority
ownership position.
At the April 26, 2006 meeting, the FNF board of directors
authorized the creation of a special committee of disinterested
directors, which we refer to as the FNF special committee,
consisting of Richard N. Massey and Douglas K. Ammerman, with
Mr. Massey serving as chairman. The FNF special committee
was authorized to, among other things, negotiate the terms and
conditions of any proposed sale of assets of FNF to FNT
and/or a
spin-off of FNT common stock to the holders of FNF common stock,
negotiate the terms and conditions of any proposed merger of FNF
with and into FIS, provide a recommendation to the FNF board of
directors as to whether such transactions with FNT and FIS
should be pursued by FNF, and retain counsel and financial
advisors selected by the FNF special committee.
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On April 26, 2006, subsequent to the FNF board of directors
meeting, the FNF special committee had its initial meeting, at
which the FNF special committee discussed the proposed
transaction in general terms and the retention of its
independent financial advisor and legal counsel. The FNF special
committee retained Bear Stearns & Co. Inc., which we
refer to as Bear Stearns, as its independent financial advisor
and requested that Bear Stearns independently consider and
evaluate the proposed transactions and any strategic
alternatives available to FNF. The FNF special committee also
retained Sullivan & Cromwell LLP, which we refer to as
Sullivan & Cromwell, as its legal counsel. LeBoeuf,
Lamb, Greene & MacRae LLP, which we refer to as
LeBoeuf, acted as legal counsel to FNF in connection with the
proposed transactions.
At a meeting of the board of directors of FIS on April 26,
2006, Mr. Foley described to the board of directors the
restructuring that FNF was considering proposing to FIS. The FIS
board of directors then voted to establish a committee of
disinterested directors, consisting of James K. Hunt, Keith W.
Hughes and David K. Hunt, with James K. Hunt serving as
chairman. The FIS special committee was authorized to
(i) review, evaluate, respond to and negotiate the terms
and conditions of any proposal that FNF might make for such a
transaction, (ii) provide a recommendation to the board of
directors as to whether such a transaction should be pursued by
FIS and if so, as to whether a particular transaction is fair to
and in the best interests of the public shareholders of FIS and
(iii) retain counsel and financial advisors selected by the
FIS special committee. The FIS special committee hired Weil,
Gotshal & Manges LLP, which we refer to as Weil, as its
legal counsel and Stephens, Inc., which we refer to as Stephens,
as its financial advisor.
On May 3, 2006, management of FNF, FIS and FNT convened an
organizational meeting for pursuit of the proposed transactions
and hosted due diligence sessions for the benefit of the
financial and legal advisors to the FNF, FIS and FNT special
committees. Following this meeting, Sullivan & Cromwell
continued reviewing certain material contracts and other
documents as part of its legal due diligence effort.
On May 5, 2006, the FIS special committee met
telephonically with Weil and Stephens. Stephens presented
information regarding the business of FIS and the potential
implications of the transaction on FIS. The FIS special
committee discussed with Weil the threshold legal and tax
ramifications of the proposed transaction and the process.
Following this meeting, Weil began reviewing certain material
contracts and other documents of FIS as part of its legal due
diligence effort.
Between May 5 and May 17, 2006, the FNF special committee
held several telephonic meetings with its legal and financial
advisors to discuss the prospective financial and other terms of
the FNT asset sale and FIS merger to be proposed to FNT and FIS.
On May 17, 2006, the FNF special committee sent term sheets
developed with the assistance of LeBoeuf and Sullivan &
Cromwell to the chairmen of the FNT and FIS special committees,
containing FNFs proposed terms for the FNT asset sale and
spin-off and the FIS merger transactions, respectively. The
proposal to FNT contemplated that consideration to FNF for the
asset contribution would be in the form of FNT common stock
having an aggregate value, based on an average market price
prior to agreement on the transactions, of $1.25 billion.
The term sheet delivered to the FIS special committee generally
described the form of the proposed transaction between FNF and
FIS and the proposed material terms of the transaction
documentation. The proposal to FIS contemplated a merger in
which FNF would merge with and into FIS, on the basis of a
conversion ratio of FIS common stock for FNF common stock that
would be based upon an exchange ratio of 1.05 shares of FIS
common stock for each share of FIS common stock then owned by
FNF, which we refer to as the exchange ratio. The term sheets
also contemplated that all FNF stock options held by employees
of FIS would be converted into FIS stock options, all FNF stock
options held by employees of FNT would be replaced with FNT
stock options, and all FNF stock options held by employees
designated by the FNF board of directors as being dual service
employees, that is, employees of both FIS and FNT, would be
converted into or replaced with a combination of FIS stock
options and FNT stock options. The proposed transaction would be
conditioned upon the consummation of the spin-off.
Beginning on May 17, 2006, Mr. Massey, the chairman of
the FNF special committee, engaged in direct discussions about
the merger with James K. Hunt, the chairman of the FIS special
committee. Mr. Hunt proposed an exchange ratio for the
merger that would entitle FNF stockholders to an aggregate of
exactly that number of FIS shares of common stock held by FNF
immediately prior to the completion of the merger or a
one-to-one
exchange
45
ratio. No exchange ratio was agreed at such time, pending
further discussion of other terms and conditions of the merger
transaction.
On May 18, 2006, in a telephonic meeting between the FIS
special committee and its legal and financial advisors, the FIS
special committee discussed the progress made on the transaction
and the terms of a term sheet received from FNF on May 17,
2006, as described above. The FIS special committee did not
accept the proposed economic terms of the proposed transaction
with FNF at this meeting. Weil also identified in more detail
the potential tax and accounting issues that the FIS special
committee would need to address to their satisfaction prior to
entering into definitive agreements with FNF. FISs legal
and financial advisors continued their due diligence efforts.
On May 22, 2006, the FIS special committee met
telephonically with its legal and financial advisors as well as
Lee Kennedy, President and Chief Executive Officer of FIS, and
Jeffrey Carbiener, Chief Financial Officer of FIS.
Mr. Kennedy described the market reaction to the proposed
transaction with FNF. Mr. Kennedy also presented his view
of the strategic advantages to FIS of the transaction. The FIS
special committee also discussed the proposed role of the FNF
management team in FIS, the assumption of equity compensation
and the status of repurchases of FIS common stock. FISs
legal and financial advisors continued their due diligence
efforts.
On May 29, 2006, in a telephonic meeting with its legal and
financial advisors, the FIS special committee discussed the
matters to be discussed with the FNF special committee at a
joint telephonic meeting scheduled for May 30, 2006,
including the term sheet received from FNF on May 26, 2006.
The term sheet again contemplated an exchange ratio equal to
1.05 shares of FIS common stock for each share of FIS
common stock held by FNF, conversion of all FNF stock options
held by FIS employees into FIS stock options, replacement of all
FNF stock options held by FNT employees with FNT stock options
and replacement or conversion of all FNF stock options held by
dual service employees with or into a combination of FNT stock
options and FIS stock options.
On May 30, 2006, in a joint telephonic meeting, the FIS
special committee and the FNF special committee discussed with
their legal and financial advisors the structure and status of
the proposed transaction, including the assumption of FNF
options by FIS and the proposed compensation arrangements for
senior executives. The FIS special committee and the FNF special
committee also discussed the timing and process of the
transaction and the progress being made with legal
documentation. The desire for a tax ruling from the Internal
Revenue Service was discussed between the parties, as well as
the status of the ruling request. The FIS special committee and
the FNF special committee then discussed other matters
concerning the transaction, including the proposed exchange
ratio and expected timing of the announcement of the
transaction. No agreement was reached between FNF and FIS at
this meeting with respect to the key economic terms of the
proposed transaction. Following this meeting, discussions
continued among legal counsel for FNF, the FNF special
committee, the FIS special committee and the FNT special
committee regarding the terms of the proposed merger agreement,
the agreement governing the asset sale to FNT and the spin-off
and related agreements. In addition, the respective
parties financial advisors continued to work on valuation
matters.
On June 1, 2006, LeBoeuf provided to the FIS and FNF
special committees and their legal counsel the initial draft of
the original merger agreement pertaining to the proposed
transaction between FNF and FIS.
On June 2, 2006, the FIS special committee had a telephonic
meeting with its legal and financial advisors to discuss the
status and structure of the proposed transaction. The FIS
special committee discussed matters pertaining to the tax ruling
request and the proposed form of employment agreement for
certain senior executives of FNF, who following the consummation
of the transactions, would be employees of both FIS and FNT,
including Mr. Foley.
On June 7, 2006, the FIS special committee met in New York
at the offices of Weil with its legal and financial advisors as
well as Mr. Kennedy, to discuss the status of the
transaction and material open matters. Participants at the
meeting discussed the most recent comments on the original
merger agreement and answered the FIS special committees
questions about the comments. Weil discussed the tax ruling
process relating to the transaction, and addressed the questions
of the FIS special committee relating to potential tax effects
of the transaction. The FIS special committee discussed
potential liabilities to be incurred by FIS resulting from the
transaction and the limitations on FIS in using its capital
stock as consideration in acquisitions following the proposed
transaction. Mr. Kennedy and the FIS special committee also
discussed the status of FISs intercompany agreements with
FNF
46
and other FNF subsidiaries and how such agreements would be
impacted by the transaction. Mr. Kennedy reiterated his
view of the potential benefits of the transaction to FIS. The
FIS special committee reviewed with Weil the remaining open
issues on the original merger agreement, including the exchange
ratio and the conversion of FNF stock options into FIS stock
options. Stephens then gave a brief presentation concerning the
market analysis of similar transactions and the overall market
reaction to the proposed transaction. The FIS special committee
discussed the market effects at length and considered what would
be the most appropriate exchange ratio for the proposed
transaction. During this meeting, the FIS special committee also
discussed the potential accounting issues relating generally to
the structure of the transaction. Following a review of the
remaining open items on the original merger agreement, the FIS
special committee then discussed the open compensation matters,
including the terms of the proposed employment agreements for
FIS executives who will be sharing time between FIS and FNT. The
FIS special committee also discussed the acceleration of equity
awards, and it was determined that FIS would seek waivers of
acceleration for any options granted under the Amended and
Restated Certegy Inc. Stock Incentive Plan on February 1,
2006.
On June 9, 2006, the FNF special committee held a
teleconference meeting with its legal and financial advisors to
discuss the status of the transaction and material open matters.
Participants at the meeting discussed FISs comments on the
original merger agreement and the FIS special committees
proposal of a
one-to-one
exchange ratio. The FNF special committee discussed such
proposal in light of Bear Stearns review of similar
precedent transactions, previously presented, and the overall
market reaction to the proposed transaction, particularly the
effects on the FNF and FIS stock prices. The FNF special
committee also discussed the tax ruling request relating to the
transaction and considered the limitations that would be imposed
on FIS in using its capital stock as consideration in
acquisitions following the proposed transaction. The FNF special
committee also reviewed with Sullivan & Cromwell the
remaining open issues on the original merger agreement,
including the exchange ratio.
On June 11, 2006, the FIS special committee had a
telephonic meeting with its legal and financial advisors to
discuss the status of the proposed transaction, focusing on
matters concerning the assumption by FIS of certain FNF stock
options in the transaction, FISs proposal for increasing
the number of shares available under the FIS stock option plan
and the composition of FISs board of directors following
the transaction. Information provided by FNF revealed the extent
to which FIS would be assuming FNF stock options, which was a
total of approximately 4.7 million options to be replaced
with FIS stock options of equivalent value. The FIS special
committee, in consultation with Stephens, expressed concern
regarding the dilutive effect that such options would have on
the ownership of FIS common stock held by existing FIS
shareholders. The FIS special committee also discussed with Weil
certain tax matters relating to the transaction.
Further teleconference meetings of the FNF special committee
were held on June 13 and June 21, 2006 with its financial
and legal advisors to discuss the status of negotiations with
both the FIS and FNT special committees and the positions that
the FNF special committee should take with respect to the
financial terms of the respective transactions, including the
treatment of FNF employee stock options, and the post-closing
composition of the FNT and new FIS boards of directors. In
considering the proposed
one-to-one
exchange ratio for the merger, the FNF special committee
recognized that, in order to preserve favorable tax and
accounting treatment of the transactions, FIS would be required
to assume all of the outstanding FNF options with the exception
of those options being assumed by FNT and approximately
4.4 million options held by senior executives of FNF. The
FNF special committee also recognized that the FIS special
committee had concerns about the potential dilutive effect of
those options on the ownership of FIS common stock held by
existing FIS shareholders. The FNF special committee discussed
with its advisors the fairness of the
one-for-one
exchange ratio in light of the proposed treatment of options,
the analysis of precedent transactions provided by Bear Stearns,
and the relative valuations of the two companies.
From June 12, 2006 until June 23, 2006, the legal and
financial advisors of FIS and FNF continued to negotiate the
transaction documents pertaining to the transaction, including a
review of ancillary agreements and disclosure schedules. In
addition, the parties discussed and negotiated the material
economic terms of the transaction. It was determined by the FIS
special committee, in consultation with Stephens, that it would
not be acceptable for FIS to assume certain vested stock options
held by three senior executives of FNF, William P.
Foley, II, Alan L. Stinson and Brent B. Bickett, due to
their dilutive effect on the ownership of FIS common stock held
by existing FIS shareholders. Through negotiation, the parties
ultimately settled on an exchange ratio of one share of FIS
common stock for each share of FIS common stock held by FNF and
on the principal terms of an agreement to be entered into
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among FNF and Messrs. Foley, Stinson and Bickett entitling
FNF prior to the closing to settle in cash, or require the
exercise of, approximately 4.4 million stock options held
by Messrs. Foley, Stinson and Bickett instead of these
options being converted into or replaced with a combination of
FNT stock options and FIS stock options. Finally, it was
determined that FNT would bear all of the pre-closing
liabilities of FNF, including those that may stem from the
consummation of the proposed transactions.
During the same period, discussions between the FNF and FNT
special committees and their advisors continued on the proposed
purchase price and the other terms of the FNT asset contribution
and spin-off transactions.
On June 23, 2006, the FNT and FNF special committees
finally agreed on a proposal in which FNT would issue to FNF, in
exchange for the asset contribution to FNT,
34,042,553 shares of FNT Class A common stock (having
a market value of approximately $700 million as of
June 23, 2006) for the non-cash assets, plus a number
of additional shares of FNT Class A Common Stock equivalent
to the contributed cash, not to exceed $275 million, to be
issued based on a price of $23.50 per share of FNT common
stock.
On June 25, 2006, the FIS special committee met
telephonically with its legal and financial advisors to discuss
the proposed final drafts of the definitive documents relating
to the proposed transaction. Representatives from Weil discussed
the resolution of the material open issues that the FIS special
committee had been discussing throughout the process, including
tax matters, the exchange ratio in the merger, and the treatment
of equity incentive compensation for senior executives of FNF
and all other FNF and FIS employees. Stephens made a
presentation to the effect that upon consideration of the
material terms of the proposed transactions, as of such date and
subject to the qualifications set forth therein, the exchange
ratio in the merger is fair, from a financial point of view, to
the shareholders of FIS other than FNF. The FIS special
committee then discussed the assumption of equity incentives of
FNF in the transaction. The costs and benefits of doing so were
discussed at length, including FISs need to provide
incentives for its employees. The FIS special committee then
discussed and reviewed certain significant provisions of the
merger agreement. Following additional discussion and
deliberation, the FIS special committee unanimously recommended
the approval and adoption of the original merger agreement by
FISs board of directors.
On June 25, 2006, shortly after the FIS special committee
meeting, the FIS board of directors met to consider the proposed
transactions and the special committees recommendation.
Representatives of Weil made a presentation to the board of
directors on its fiduciary duties in connection with the
proposed transactions and also reviewed the processes of
deliberation and due diligence undertaken by the special
committee and its advisors in connection with the proposed
transactions. Mr. Hunt presented the FIS special
committees findings and its recommendation. Stephens then
made a presentation to the FIS board of directors, substantially
the same in form and substance as the presentation made to the
FIS special committee, and gave its opinion to the full board of
directors that the transactions, including the consideration to
be received by FIS, were fair, from a financial point of view,
to FIS and its stockholders other than FNF. Representatives of
LeBoeuf also attended the meeting. The board of directors
discussed, among other factors, that the proposed transactions
seemed to capture the value gap associated with FNF common
stock, the fairness of the exchange ratio, the potential for the
transactions to enhance stockholder value, the increased
efficiency of the elimination of the holding company structure,
the positive effects on potential acquisitions, and the tax and
accounting treatment of the transactions. See
FISs Reasons for the Merger and
Recommendation of FISs Board of Directors beginning
on page 51.
After full consideration of the presentations of the FIS special
committee, Stephens and Weil, and after additional deliberation,
the FIS board of directors unanimously adopted and approved
among other things the merger, the original merger agreement,
the management compensation arrangements proposed to be entered
into by FIS in connection with the merger and the other
agreements relating to the transactions and unanimously resolved
to recommend that the FIS shareholders approve among other
things the issuance of FIS common stock in connection with the
merger.
On June 25, 2006, the FNF special committee met
telephonically, together with its legal and financial advisors,
to discuss the proposed final drafts of the definitive documents
relating to the proposed transaction. The FNF special committee
was advised that the FIS and FNT boards of directors had
approved the proposed transactions that day. At the meeting,
Bear Stearns made a presentation on the financial aspects of the
proposed transactions, and the committee discussed with its
financial and other advisors, among other things, the financial
terms of the transactions, including the exchange ratio, the
financial analyses performed by Bear Stearns, the potential
increase
48
in stockholder value resulting from the transactions and the
relative valuation of FNF and FIS. After the presentation and
these discussions, Bear Stearns gave its opinion that the
original conversion ratio, the original FNT exchange number and
the
spin-off,
taken as a whole, were fair from a financial point of view to
FNF and the stockholders of FNF. In addition, representatives of
Sullivan & Cromwell made a presentation with respect to
the FNF special committees fiduciary duties in connection
with its consideration of the merger and the other transactions.
After full consideration of the presentations of Bear Stearns
and Sullivan & Cromwell, and of the merger and the
other proposed transactions, and after additional deliberation,
the FNF special committee determined that the transactions were
fair to and in the best interest of FNFs stockholders and
unanimously resolved to recommend that the FNF board of
directors approve the original merger agreement, the original
securities exchange and distribution agreement and the other
agreements relating to the transactions, and to recommend that
the FNF board of directors recommend that the stockholders vote
to approve and adopt the original merger agreement.
On June 25, 2006, shortly after the FNF special committee
meeting, the FNF board of directors met to consider the proposed
transactions and the FNF special committees
recommendation. Representatives of Sullivan & Cromwell
made a presentation to the FNF board of directors on its
fiduciary duties in connection with the proposed transactions
and also reviewed the processes of deliberation and due
diligence undertaken by the special committee and its advisors
in connection with the proposed transactions. Mr. Massey
presented the FNF special committees findings and its
recommendation. Bear Stearns then made a presentation to the FNF
board of directors, substantially the same in form and substance
as the presentation made to the FNF special committee, and gave
its opinion to the full board of directors that the original
conversion ratio, the original FNT exchange number and the
spin-off, taken as a whole, were fair from a financial point of
view to FNF and the stockholders of FNF. Representatives of
LeBoeuf also participated in the meeting. The FNF board of
directors discussed, among other factors, the fairness of the
exchange ratio, the elimination of the
sum-of-the-parts
discount and the narrowing of the valuation gap for FNF
stockholders, the positive effects on potential acquisitions by
FIS using equity as a component of consideration, and the
tax-free treatment of the transactions. See
FNFs Reasons for the Merger and
Recommendation of FNFs Board of Directors, beginning
on page 52.
After full consideration of the presentations of the FNF special
committee, Bear Stearns and Sullivan & Cromwell, and
after additional deliberation, the FNF board of directors
unanimously approved the original merger agreement, the original
distribution agreement and the other agreements relating to the
transactions and unanimously resolved to recommend that the FNF
stockholders vote to adopt the original merger agreement and
approve the merger. The FNF board of directors also unanimously
approved the letter agreement regarding executive options;
Mr. Foley recused himself from that vote, however.
Following the meetings of the FNF and FIS boards of directors,
on the evening of June 25, 2006, FNF and FIS signed the
merger agreement, FNF and FNT signed the distribution agreement
and FNF and Messrs. Foley, Stinson and Bickett signed the
letter agreement regarding executive options.
On June 26, 2006, prior to the open of trading on the NYSE,
FNF, FIS and FNT issued press releases announcing the
transactions.
In late August 2006, FNF proposed to amend and restate the
distribution agreement and the merger agreement in order to
restructure the transactions to provide for FNF to retain FNF
Leasing and its 75% owned subsidiary, FNF Capital LLC, rather
than contribute those assets to FNT. FNF Leasing would
subsequently be transferred to FIS following the spin-off. FNF
Leasing is engaged in the technology leasing business and
represents a small portion of the assets that were the subject
of the original distribution agreement. FNF proposed the change
as a result of comments received from the Internal Revenue
Service on FNFs request for a ruling that the transactions
(including the spin-off) will be tax free transactions under the
Internal Revenue Code. See Summary of Material
United States Federal Income Tax Considerations. The
proposed revised agreements also corrected typographical errors
and made technical legal revisions to conform the agreements to
the intent of the parties. LeBoeuf prepared drafts of the
amended and restated distribution agreement, the amended and
restated merger agreement and the Leasing merger agreement,
which we refer to collectively as the revised agreements, and
delivered the revised agreements to counsel for the FNF, FIS and
FNT special committees for consideration by each special
committee.
On September 6, 2006, the FIS special committee met
telephonically with its legal and financial advisors to discuss
the revised terms of the transaction, including the Leasing
merger. It was discussed whether the FIS special committee
49
would require Stephens to update its fairness opinion in light
of the proposed terms, and the FIS special committee concluded
that the Leasing merger was not financially significant to
warrant the issuance of a revised fairness opinion. On
September 11, 2006, the FIS special committee again met
telephonically to discuss the status of the transaction and
deliberate regarding the fairness of the transaction as a whole
to FIS and its shareholders. Representatives from Weil discussed
the resolution of the material open issues that the FIS special
committee had been discussing. The FIS special committee then
discussed and reviewed certain significant provisions of the
merger.
On September 12, 2006, the FNF special committee held a
telephonic meeting to discuss the restructuring of the proposed
transactions. Bear Stearns gave a presentation on the financial
aspects of the restructured form of the proposed transactions,
including the Leasing merger. Bear Stearns also advised the FNF
special committee (without issuing, reissuing or amending its
fairness opinion in any way) that, on the date that it issued
its fairness opinion, it would not have viewed the changes to
the transaction structure involving Leasing, as described above,
as material to its financial analysis of the proposed
transactions or its conclusions as to the fairness of the
original conversion ratio, the original FNT exchange number and
the spin-off, taken as a whole (as described above). The FNF
special committee then further discussed the legal, tax,
financial and accounting aspects of the restructured form of the
proposed transactions, and made inquiries of representatives of
FNF management in attendance at the meeting. After full
consideration of the presentation of Bear Stearns and of the
revised structure of the proposed transactions, and the
information provided by management and its advisors, the FNF
special committee unanimously resolved to recommend that the FNF
board of directors approve the revised agreements.
On September 12, 2006, shortly after the FNF special
committee meeting, the FNF board of directors met telephonically
to consider the restructured form of the proposed transactions.
The FNF special committee reported that it had voted to
recommend the revised form of the transactions as well as the
revised agreements to the FNF board of directors and stated its
reasons for its recommendation. The FNF board of directors then
discussed certain legal, tax, accounting and financial aspects
of the proposed transaction, in consultation with management and
its legal and financial advisors. After full consideration of
the revised form of the transaction, the recommendation of the
special committee and the information provided by management and
its advisors, the FNF board of directors unanimously approved
the revised agreements.
On September 13, 2006, FNF informed the FNF and FIS special
committees through their respective counsel that the 25%
minority owner of FNF Capital LLC was considering attempting to
exercise certain tag-along rights pursuant to the FNF Capital
LLC Operating Agreement, which if available might allow the
minority shareholder to be given an opportunity to sell its LLC
interests to FIS on the same terms and conditions as provided in
the Leasing merger. Additional revisions to the revised
agreements, which we refer to as the additional revisions, were
made in order to provide that, in the event of the exercise of
the FNF Capital LLC minority owners tag-along rights, if
the shares were not otherwise acquired by a third party
(including FNF Leasing as described below), FIS would purchase
the minority owners interests in exchange for FIS stock
simultaneously with the Leasing merger, and that in the event
that FNF Leasing were to purchase the minority owners
interests in FNF Capital LLC, FNF Leasing would receive FIS
stock in the Leasing merger on the basis of a 100% interest in
FNF Leasing. Revised agreements showing the additional revisions
were distributed to the special committees and their legal and
financial advisors for review.
On September 17, 2006, the FNF special committee met
telephonically with its legal and financial advisors to review
the additional revisions. The FNF special committee discussed
the effect of and purpose for the additional revisions. Bear
Stearns advised the FNF special committee that (without issuing,
reissuing or amending its fairness opinion in any way), on the
date that it issued its fairness opinion, it would not have
viewed the additional revisions, as material to its financial
analysis of the proposed transactions, or its conclusions as to
the fairness of the original conversion ratio, the original FNT
exchange number and the spin-off, taken as a whole. After full
consideration of the additional revisions, the FNF special
committee unanimously resolved to recommend that the FNF board
of directors adopt the additional revisions to the revised
agreements. The FIS special committee also considered the
additional revisions and unanimously resolved to recommend that
the FIS board of directors adopt them.
On September 18, 2006, the board of directors of FNF
unanimously approved the revised agreements by written consent.
On the evening of September 18, 2006, FNF and FIS signed
the amended and restated merger agreement. FNF and FNT signed
the amended and restated distribution agreement and FIS, FNF
Leasing, and a wholly owned subsidiary of FIS signed the Leasing
Merger agreement.
50
FISs
Reasons for the Merger and Recommendation of FISs Board of
Directors
The FIS board of directors believes that the merger agreement
and the transactions contemplated by the merger agreement,
including the issuance of shares of FIS common stock in
connection with the merger, are in the best interests of FIS and
its shareholders. Accordingly, the FIS board of directors
recommends that FIS shareholders vote FOR approval of the
issuance of shares of FIS common stock pursuant to the merger
agreement.
In reaching its conclusion to approve the merger agreement and
to recommend that FIS shareholders approve the issuance of
shares of FIS common stock in connection with the merger, the
FIS board of directors reviewed and discussed the merger
agreement and the transactions contemplated thereby, including
the merger and the related transactions, with FISs
management team and its financial, actuarial and legal advisors
and considered a number of factors, including the following:
Strategic Considerations. FISs board of
directors believes that the merger with FNF will provide a
number of significant strategic opportunities and benefits,
including the following:
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eliminating the controlling shareholder, increasing clarity
around ownership and removing any inherent conflict of interest
associated with FNFs current control of FIS;
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removing any market discount associated with having a
controlling shareholder;
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making it easier for FIS to use its stock to effect acquisitions;
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increasing the public float of FIS common stock;
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easing the use of FIS equity for management incentives;
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providing for continued access to certain FNF executives and
management expertise;
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allowing for greater core management focus; and
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facilitating potential inclusion in market indices such as the
S&P 500 that FIS was previously excluded from because of the
control by FNF.
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Other Factors Considered by the FIS Board of
Directors. In addition to considering the
strategic factors outlined above, the FIS board of directors
considered the following additional factors:
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that FIS would experience a near-term shift in its shareholder
base;
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possibility for a significant tax cost as a result of a
post-closing action that causes the spin-off to be treated as a
taxable transaction under Section 355(e) of the Code;
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conversion of FNF stock options into FIS options diluting
existing non-FNF FIS shareholders;
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the possibility that, over the long term, the FIS and FNT
businesses might become direct competitors; and
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FIS needing to recreate some functions which were previously
conducted at the FNF parent level.
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The foregoing discussion of the information and factors
considered by FISs board of directors is not meant to be
exhaustive but is believed to include all material factors
considered by it in connection with its determination that the
terms of the merger agreement, including the merger and the
issuance of FIS common stock in the merger, are advisable and in
the best interests of FIS and its shareholders. In view of the
wide variety of factors considered in connection with its
evaluation of the merger and the complexity of these matters,
the FIS board of directors did not find it useful, and did not
attempt, to quantify, rank or otherwise assign relative weights
to these factors. In addition, the FIS board of directors did
not undertake to make any specific determination as to whether
any particular factor, or any aspect of any particular factor,
was favorable or unfavorable to its ultimate decision, but
rather the FIS board of directors conducted an overall analysis
of the factors described above, including through discussions
with, and the questioning of, FISs management team and
outside financial, actuarial and legal advisors. In considering
the factors described above, individual members of the FIS board
of directors may have given different weight to different
factors.
In considering the recommendation of the FIS board of directors
with respect to the merger agreement and the merger, you should
be aware that certain FIS directors and executive officers have
arrangements that cause them to
51
have interests in the transaction that are different from, or
are in addition to, the interests of FIS shareholders generally.
See the section entitled Interests of
Directors and Executive Officers in the Merger beginning
on page 66.
FNFs
Reasons for the Merger and Recommendation of FNFs Board of
Directors
The FNF board of directors believes that the merger agreement
and the transactions contemplated by the merger agreement,
including the merger, are in the best interests of FNF and its
stockholders and are consistent with, and in furtherance of, the
long-term business strategies and goals of FNF. Accordingly, the
FNF board of directors has unanimously adopted the merger
agreement and approved the merger and recommends that FNF
stockholders vote FOR adoption of the merger agreement
and approval of the merger.
The FNF board of directors, in reaching its decision to adopt
the merger agreement and approve the merger, consulted with its
management, as well as with its financial, actuarial and legal
advisors, carefully reviewed a significant amount of information
and considered a variety of factors weighing positively in favor
of the merger, including, without limitation, the following:
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the fairness of the exchange ratio to FNF stockholders;
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the opinion of FNFs financial advisor Bear Stearns that,
as of June 25, 2006, and based upon and subject to the
assumptions, qualifications and limitations set forth in the
opinion, the original conversion ratio, the original FNT
exchange number and the spin-off, taken as a whole, were fair
from a financial point of view to FNF and the stockholders of
FNF;
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the advice of Bear Stearns that, on the date that it issued its
fairness opinion, it would not have viewed the changes to the
transaction structure involving Leasing, as described above, as
material to its financial analysis of the proposed transactions
or its conclusions as to the fairness of the original conversion
ratio, the original FNT exchange number and the spin-off, taken
as a whole;
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the simplified structure of FIS along with the distribution of
new FNT Class A common stock in the spin-off, eliminates
the
sum-of-the-parts
discount for FNF stockholders and narrows the valuation gap for
FNF stockholders;
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the transactions provide FNF stockholders with separate
securities in two companies that each presents a distinct
business model to a wider market of potential shareholders;
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the transactions allow FIS to pursue acquisitions utilizing
equity as a component of consideration;
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the transactions enable FIS to better use equity to compensate
employees; and
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the transactions provide a tax-free merger with FIS.
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In addition to these factors, the FNF board of directors also
considered the potential adverse impact of other factors
weighing negatively towards the merger. These included the
following:
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FNFs current platform no longer exists as an independent
company; and
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collectively FNF stockholders lose centralized control of FIS
and the other assets held at FNF.
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The FNF board of directors, in reaching its decision to approve
the merger, also considered the interests that certain FNF
executive officers and directors may have with respect to the
merger in addition to their interests as FNF stockholders
generally and the fact that certain provisions of Georgia law
and the FIS certificate of incorporation and bylaws may be
viewed as having anti-takeover effects with respect to
transactions not approved by the FIS board of directors (see the
section entitled Comparison of Shareholders Rights and
Corporate Governance Matters beginning on page 149).
The FNF board of directors concluded that the positive aspects
of the merger significantly outweighed the negative factors.
This discussion of the information and factors considered by the
FNF board of directors includes all the material positive and
negative factors considered by the FNF board of directors, but
it is not intended to be exhaustive and may not include all of
the factors considered by the FNF board of directors. The FNF
board of
52
directors did not quantify or assign any relative or specific
weights to the various factors that it considered in reaching
its determination that the merger agreement and the merger are
advisable and in the best interests of FNF and its stockholders.
Rather, the FNF board of directors viewed its position and
recommendation as being based on the totality of the information
presented to and factors considered by it. In addition,
individual members of the FNF board of directors may have given
differing weights to different factors.
In considering the recommendation of the FNF board of directors
with respect to the merger agreement and the merger, you should
be aware that certain FNF directors and executive officers have
arrangements that cause them to have interests in the
transaction that are different from, or are in addition to, the
interests of FNF stockholders generally. See the section
entitled Interests of Directors and Executive
Officers in the Merger beginning on page 66.
Opinions
of Financial Advisors
The FIS special committee engaged Stephens, Inc. as its
financial advisor and the FNF special committee engaged Bear
Stearns & Co. Inc. as its financial advisor in
connection with the merger. A summary of their respective
opinions and related financial analyses appears below.
Opinion
of FISs Financial Advisor
The FIS special committee engaged Stephens on May 10, 2006,
to advise and provide a fairness opinion in connection with the
proposed transaction pursuant to the original merger agreement.
Stephens delivered a written opinion, dated June 25, 2006,
to the board of directors of FIS to the effect that as of such
date and subject to the qualifications set forth therein, the
original conversion ratio in the merger is fair, from a
financial point of view, to the shareholders of FIS other than
FNF.
No limitations were imposed by the board of directors of FIS on
Stephens with respect to the investigations made or procedures
followed by it in furnishing its opinion. The original
conversion ratio was determined through negotiations between the
FIS special committee and the FNF special committee. Although
Stephens did assist the FIS special committee in these
negotiations, it was not asked to propose or recommend, and did
not propose or recommend, any specific conversion ratio as the
appropriate conversion ratio for the transaction.
The full text of the written fairness opinion of Stephens, which
sets forth the assumptions made, general procedures followed,
factors considered and limitations on the review undertaken by
Stephens in rendering its opinion, is attached as
Annex E and is incorporated into this proxy
statement/prospectus by reference. You should read this opinion
in its entirety.
Stephens has consented to the use of its fairness opinion as an
annex to this proxy statement/prospectus. Stephens provided the
fairness opinion to the board of directors of FIS for its
information, and the fairness opinion is directed only to the
fairness from a financial point of view of the original
conversion ratio and does not constitute a recommendation to any
shareholder of FIS as to how any shareholder should vote on the
transaction or any matter related thereto. The summary of the
fairness opinion set forth in this proxy/prospectus statement is
qualified in its entirety by reference to the full text of the
fairness opinion.
In connection with rendering its opinion, Stephens:
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(i)
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analyzed certain publicly available financial statements and
reports regarding FIS and FNF;
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(ii)
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analyzed, on a pro forma basis, the effect of the proposed
transaction;
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(iii)
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reviewed the reported prices and trading activity for FIS common
stock;
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(iv)
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compared the financial performance of FIS and the prices and
trading activity of FIS common stock with that of certain other
comparable publicly-traded companies and their securities;
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(v)
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reviewed the financial terms, to the extent publicly available,
of certain comparable transactions;
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(vi)
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discussed with management of FIS the operations of and future
business prospects for FIS and the anticipated financial
consequences of the proposed transaction;
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53
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(vii)
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discussed with management of FIS and FNF the anticipated tax
treatment of the proposed transaction; and
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(viii)
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performed such other analyses and provided such other services
as deemed appropriate.
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In preparing the fairness opinion, Stephens relied on the
accuracy and completeness of the representations and warranties
as set forth in the original merger agreement and other
information and financial data provided to it by FIS, without
independently verifying the same, and Stephens opinion is
based, in substantial part, upon such information. Stephens has
inquired into the reliability of such information and financial
data only to the limited extent necessary to provide a
reasonable basis for its opinion, recognizing that it was
rendering only an informed opinion and not an appraisal or
certification of value.
Stephens opinion is necessarily based upon market,
economic and other conditions as they exist and could be
evaluated on, and on the information made available to Stephens
as of the date of the opinion. Stephens has assumed that
managements anticipated tax treatment of the transaction
is the proper tax treatment of the transaction and will
substantially result in the tax consequences estimated by
management of FIS. Stephens has assumed that in the course of
obtaining the necessary regulatory or other consents or
approvals (contractual or otherwise) for the proposed
transaction, no restrictions, including any amendments or
modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the proposed transaction.
Stephens was not asked to consider, and the fairness opinion
does not in any manner address, the price at which FIS common
stock would trade following either the announcement or
consummation of the proposed transaction.
The Stephens opinion was one of many factors considered by the
board of directors of FIS in deciding to vote for the approval
of the original merger agreement. Consequently, Stephens
analysis described below should not be viewed as determinative
of the decision of the board of directors of FIS with regard to
the fairness of the original conversion ratio.
The following is a summary of the material financial analyses
used by Stephens in connection with the preparation of its
fairness opinion dated June 25, 2006.
Exchange
Ratio Considerations
Stephens reviewed and considered the following methodologies in
analyzing the proposed original exchange ratio, with a focus on
whether the ownership of FNF in FIS of greater than 50% would
typically receive a premium valuation in the public market when
compared to a less than 50% ownership position. If it were
determined that a greater than 50% ownership position did
typically receive a premium valuation (or control premium), it
would imply that the exchange ratio should be greater than the
exchange ratio is in the proposed transaction.
Holding Company Analysis: Stephens analyzed
how publicly traded companies with a parent that own in excess
of 50% of the voting control of the company are valued relative
to their peers who do not have a parent with a similar ownership
level.
Spin-Off Analysis: Stephens analyzed how
publicly traded companies with a majority parent traded before
and after control was distributed out to the public
shareholders, via a spin-out transaction.
Mergers-of-Equals
Analysis: Stephens analyzed the premium received
by the target company in transactions deemed to be mergers of
equals.
Holding
Company Analysis
Stephens reviewed 14 publicly traded companies across a wide
variety of industries with a control shareholder and compared
valuation multiples to that of the publicly traded comparable
companies. These comparable companies are set forth in the table
below.
54
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% Owned
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Company
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Parent
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by Parent
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Alcon Inc.
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Nestle SA
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75%
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Genentech Inc.
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Roche Holding Ag
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56%
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Hearst-Argyle Television Inc.
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Hearst Broadcasting
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50%
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Interactive Data Corp.
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Pearson PLC
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62%
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Kraft Foods Inc.
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Altria Group
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57%
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MGM Mirage
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Tracinda Corp.
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56%
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Multi-Fineline Electronix
Inc.
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WBL Corp.
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61%
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Southern Copper Corp.
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Grupo Mexico SA
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75%
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State Auto Financial Corp.
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State Automobile Mutual Insurance
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65%
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The Great Atlantic &
Pacific Tea Co.
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Tengelmann Warenhandelsgesellschaft
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54%
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Total System Services Inc.
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Synovus Financial Corp.
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81%
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United States Cellular Corp.
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Telephone & Data Systems
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70%
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Valhi Inc.
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Valhi Group Inc.
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92%
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Verint Systems Inc.
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Comverse Technology
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58%
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Although the results were varied, the companies analyzed
generally traded at a discount to their peer group, indicating
some premium valuation may be attributable to the control
position.
Spin-Off
Analysis
Stephens examined 13 recent spin-off transactions, with sizes
greater than $1 billion, in which a company with a control
shareholder was spun-off to the public and how the shares traded
after announcement of the transaction compared to before the
transaction. On average, the share price of the subsidiaries
spun-off outperformed the S&P 500 Index by 4.3% from the
announcement date of each spin-off to 60 days after
announcement indicating some premium valuation attributable to
the control ownership stake. The following table summarizes the
mean and median stock price performance of the stock of these
spin-offs relative to the S&P 500 Index over specified
periods.
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Selected Spin-Offs
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Mean and Median Stock Price Performance Relative to S&P
500
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Performance 1 Day Prior Announcement vs.
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1 Day
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1 Week
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60 Days
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After Annc.
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After Annc.
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After Annc.
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Mean
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2.5
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%
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6.6
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%
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4.3
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%
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Median
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0.0
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%
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7.0
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%
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3.8
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%
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Stephens also examined 8 other spin-off transactions where a
public company with a shareholder controlling over 50% creates a
dual class stock and then spins off all of their common stock to
their public shareholders. On average, the share price of
subsidiaries spun-off outperformed the S&P 500 Index by
10.1% from the announcement date of the spin-off to 60 days
after announcement indicating some premium attributable to the
control ownership stake. The following table summarizes the mean
and median stock price performance of the stock of these
spin-offs relative to the S&P 500 Index over specified
periods.
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Selected Spin-Offs
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Mean and Median Stock Price Performance Relative to S&P
500
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|
|
|
Performance 1 Day Prior Announcement vs.
|
|
|
|
1 Day
|
|
|
1 Week
|
|
|
60 Days
|
|
|
|
After Annc.
|
|
|
After Annc.
|
|
|
After Annc.
|
|
|
Mean
|
|
|
−0.4
|
%
|
|
|
−2.6
|
%
|
|
|
10.1
|
%
|
Median
|
|
|
−2.1
|
%
|
|
|
−0.6
|
%
|
|
|
3.3
|
%
|
55
Merger-Of-Equals
Analysis
Stephens analyzed 18 transactions deemed to be mergers of equals
announced between February 25, 2000 and October 10,
2005 and the premium received by the target company. These
precedent transactions are set forth in the following table.
|
|
|
|
|
Acquiror
|
|
Target
|
|
Date Announced
|
|
Lincoln National Corp.
|
|
Jefferson-Pilot Corp.
|
|
October 10, 2005
|
Entegris Inc.
|
|
Mykrolis Corp.
|
|
March 21, 2005
|
Sprint Corp.
|
|
Nextel Communications Inc.
|
|
December 15, 2004
|
National-Oilwell inc
|
|
Varco International Inc.
|
|
August 12, 2004
|
Belden Inc.
|
|
Cable Design Technologies Corp.
|
|
February 4, 2004
|
IDEC Pharmaceuticals Corp.
|
|
Biogen Inc.
|
|
June 20, 2003
|
Gart Sports Co.
|
|
Sports Authority Inc.
|
|
February 19, 2003
|
Identix Inc.
|
|
Visionics Corp.
|
|
February 22, 2002
|
Western Multiplex Corp.
|
|
Proxim Inc.
|
|
January 17, 2002
|
Phillips Petroleum Co. Inc.
|
|
Conoco Inc.
|
|
November 18, 2001
|
GlobeSpan Inc.
|
|
Virata Corp.
|
|
October 1, 2001
|
UNB Corp.
|
|
BancFirst Ohio Corp.
|
|
September 6, 2001
|
Santa Fe International
Corp.
|
|
Global Marine Inc.
|
|
September 4, 2001
|
Mead Corp.
|
|
Wetvaco Corp.
|
|
August 29, 2001
|
Virginia Financial Corp.
|
|
Virginia Commonwealth
|
|
June 13, 2001
|
Pride International Inc.
|
|
Marine Drilling Co.
|
|
May 23, 2001
|
Tuboscope Inc.
|
|
Varco International Inc.
|
|
March 22, 2000
|
NetIQ Corp.
|
|
Mission Critical Software Inc.
|
|
February 25, 2000
|
In its analysis, Stephens derived and compared the premium
received by the target over its stock price at different time
periods before the transaction was announced. The following
table summarizes the mean and median premiums received by the
target over specified periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Merger of Equals Transactions
|
|
|
|
Mean and Median Premium Received
|
|
|
|
Premium to Targets Stock Price
|
|
|
|
1 Day
|
|
|
1 Week
|
|
|
60 Days
|
|
|
|
Prior Annc.
|
|
|
Prior Annc.
|
|
|
Prior Annc.
|
|
|
Mean
|
|
|
5.1
|
%
|
|
|
2.2
|
%
|
|
|
2.8
|
%
|
Median
|
|
|
5.4
|
%
|
|
|
6.8
|
%
|
|
|
5.9
|
%
|
Fidelity
National Information Services Stand-Alone Valuation
Analyses
Stephens also developed its view of a stand-alone valuation of
FIS to determine if its stock is undervalued due, in part, to
the current ownership of FNF and corporate structure. If FIS
appeared to be undervalued, this could imply that there was a
discount in the FIS share price due to the ownership of FNF and
limitations resulting from its corporate structure and therefore
support an exchange ratio higher than the one in the proposed
transaction.
Comparable Companies Analysis. Stephens
derived a range of potential values of FIS in part by reference
to publicly-traded companies that Stephens believed to offer
similar products, to have similar operating and financial
characteristics
and/or to
service similar markets.
Comparable Acquisition Analysis. Stephens
derived a range of potential values of FIS in part relative to
recent merger and acquisition transactions that Stephens
believed to involve similar businesses.
Discounted Cash Flow Analysis. Stephens
derived a range of potential values of FIS in part as the sum of
FISs unlevered free cash flows (before financing costs)
over a forecast period, and FISs terminal or residual
value at the end of the forecast period.
56
Comparable
Companies Analysis
Using publicly available research analyst estimates and other
publicly available information, Stephens analyzed, among other
things, the implied value of FIS based on corresponding trading
multiples of selected publicly-traded companies that Stephens
believed were generally comparable to FIS. These comparable
companies are set forth in the table below.
|
|
|
|
|
Comparable Publicly-Traded Companies
|
|
Alliance Data Systems
|
|
Global Payments Inc.
|
|
Total System Services
|
First Data Corp.
|
|
Jack Henry &
Associates, Inc.
|
|
|
Fiserv, Inc.
|
|
Open Solutions Inc.
|
|
|
In its analysis, Stephens derived and compared multiples for
FIS, and a range of multiples for the selected companies,
calculated as follows:
|
|
|
|
|
Enterprise value, which Stephens defined as market
capitalization plus long-term debt and preferred stock (on an as
converted basis, if applicable) minus cash, and which we refer
to as EV, divided by operating earnings before interest, taxes,
depreciation and amortization, and certain extraordinary or
non-recurring charges, which we refer to as EBITDA, for calendar
year 2006, which we refer to as 2006E EBITDA.
|
|
|
|
Price per share as a multiple of the estimated calendar year
2006 cash earnings per diluted share, which Stephens defined as
net income plus purchased intangible amortization plus certain
extraordinary or non-recurring charges divided by diluted shares
outstanding, and which we refer to as 2006E Cash EPS.
|
All multiples were based on closing stock prices as of
June 9, 2006. Results of Stephens comparable
companies analysis are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
Multiple Range
|
|
|
Multiple
|
|
|
Multiple
|
|
|
FIS
|
|
|
|
High
|
|
|
Low
|
|
|
Mean
|
|
|
Median
|
|
|
Multiple
|
|
|
EV/2006E EBITDA
|
|
|
13.1
|
x
|
|
|
7.5
|
x
|
|
|
10.3
|
x
|
|
|
10.3
|
x
|
|
|
8.9x
|
|
2006E Cash EPS
|
|
|
27.5
|
|
|
|
16.8
|
|
|
|
20.7
|
|
|
|
19.3
|
|
|
|
17.3
|
|
Based on this analysis, Stephens established a range of implied
equity values per share of FIS common stock of $31.51 to $48.66.
No company used in the above analysis is identical to FIS. In
evaluating companies identified by Stephens as comparable to
FIS, Stephens made judgments and assumptions with regard to
industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond
the control of FIS, such as the impact of competition on the
business of FIS and the industry generally, industry growth and
the absence of any material change in the financial condition
and prospects of FIS or the industry or in the financial markets
in general. A complete analysis involves complex considerations
and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors
that could affect the public trading values of such comparable
companies to which they are being compared; mathematical
analysis is not in itself a meaningful method of using selected
company data.
Comparable
Acquisition Analysis
Using publicly available research analyst estimates and other
publicly available information, Stephens analyzed, among other
things, the consideration offered and the implied transaction
value multiples paid or proposed to be paid in 19 selected
completed mergers and acquisitions closed between March 11,
2004 and May 10, 2006, that involved targets that provide
core processing or payment services to financial institutions,
which
57
Stephens believed were generally comparable to FIS. These
comparable acquisitions are set forth in the following table.
|
|
|
|
|
Acquiror
|
|
Target
|
|
Closing Date
|
|
Management
|
|
iPayment, Inc.
|
|
May 10, 2006
|
Sage Group
|
|
Verus Financial Management Inc.
|
|
February 6, 2006
|
Fiserv Inc.
|
|
BillMatrix Corporation
|
|
August 13, 2005
|
eFunds Corp.
|
|
Wildcard Systems Inc.
|
|
July 1, 2005
|
Harland Financial
|
|
Intrieve, Inc.
|
|
April 4, 2005
|
Equifax
|
|
APPRO Systems, inc.
|
|
March 5, 2005
|
Metavante
|
|
VECTORsgi
|
|
November 22, 2004
|
S1 Corp.
|
|
Mosaic
|
|
November 12, 2004
|
Fidelity National Financial
|
|
InterCept, Inc.
|
|
November 8, 2004
|
Open Solutions Inc.
|
|
Datawest Solutions Inc.
|
|
October 29, 2004
|
Metavante Corporation
|
|
NYCE
|
|
July 30, 2004
|
Open Solutions Inc.
|
|
Member Data Services
|
|
July 9, 2004
|
Metavante Corporation
|
|
Advanced Financial Solutions
|
|
July 1, 2004
|
Fair Isaac Corp.
|
|
London Bridge
|
|
May 28, 2004
|
Metavante Corporation
|
|
Kirchman Corporation
|
|
May 28, 2004
|
Siebel Systems Inc.
|
|
Eontec
|
|
April 20, 2004
|
Fidelity National Financial
|
|
Sanchez Computer Associates
|
|
April 14, 2004
|
Fidelity National Financial
|
|
Bankware
|
|
April 7, 2004
|
Fidelity National Financial
|
|
Aurum Technology Inc.
|
|
March 11, 2004
|
In its analysis, Stephens derived and compared implied
transaction value multiples for the comparable transactions,
calculated as follows:
|
|
|
|
|
aggregate consideration to be paid in the selected comparable
transactions (including the assumption or repayment of net
debt), which we refer to as Enterprise Value, divided by revenue
for the next twelve months after the transaction announcement
date, which we refer to as NTM Revenue.
|
|
|
|
Enterprise Value divided by EBITDA for the next twelve months
after the transaction announcement date, which we refer to as
NTM EBITDA.
|
Stephens analysis did not take into account different
market and other conditions during the period in which the
selected transactions occurred. All multiples for the comparable
transactions were based on public information available at the
time of the announcement of such transactions.
The results of Stephens comparable acquisition analysis
are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
Multiple Range
|
|
|
Multiple
|
|
|
Multiple
|
|
|
FIS
|
|
|
|
High
|
|
|
Low
|
|
|
Mean
|
|
|
Median
|
|
|
Multiple
|
|
|
EV/NTM Revenue
|
|
|
4.0
|
x
|
|
|
1.3
|
x
|
|
|
2.4
|
x
|
|
|
2.1
|
x
|
|
|
2.4
|
x
|
EV/NTM EBITDA
|
|
|
15.0
|
|
|
|
4.7
|
|
|
|
10.3
|
|
|
|
9.2
|
|
|
|
8.9
|
|
Based on the ratios derived for the comparable acquisitions,
Stephens established a range of implied equity values per share
of FIS common stock of $33.67 to $43.86.
No transaction utilized in the analysis above is identical to
the proposed transaction. A complete analysis involves complex
considerations and judgments concerning differences in financial
and operating characteristics of the companies involved in these
transactions and other factors that could affect the transaction
multiples in such comparable transactions to which the proposed
transaction is being compared; mathematical analysis (such as
determining the mean or the median) is not in itself a
meaningful method of using selected transaction data.
58
Discounted
Cash Flow Analysis
Stephens performed a discounted cash flow analysis on FIS to
estimate the equity value per share of FIS. Stephens calculated
a range of net present enterprise values for FIS based on its
free cash flow over the projected time period using a weighted
average cost of capital for the company ranging from 11% to 13%
and terminal value multiples of fiscal year 2011 EBITDA ranging
from 9.0x to 10.0x.
Based on the implied valuations of FIS resulting from the
discounted cash flow analysis, Stephens established a range of
implied equity values for a share of FIS common stock of $36.36
to $45.13 per share.
The summary set forth above does not purport to be a complete
description of the analyses performed by Stephens but describes,
in summary form, the principal elements of the presentation made
by Stephens to the board of directors of FIS on June 25,
2006. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods
to the particular circumstances and, therefore, such an opinion
is not readily susceptible to summary description. Each of the
analyses conducted by Stephens was carried out in order to
provide a different perspective on the transaction and to add to
the total mix of information available. Stephens did not form a
conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion as to the
fairness of the proposed transaction from a financial point of
view. Rather, in reaching its conclusion, Stephens considered
the results of the analyses in light of each other and
ultimately reached its opinion based on the analyses taken as a
whole. Accordingly, notwithstanding the separate factors
summarized above, Stephens has indicated to FIS that it believes
that consideration of some of the analyses and factors
considered, without considering all analyses and factors, could
create an incomplete or inaccurate view of the evaluation
process underlying the opinion. The analyses performed by
Stephens are not necessarily indicative of actual values or
future results, which may be significantly more or less
favorable than suggested by such analyses.
Fees
Stephens will receive a fee for its services to FIS. Pursuant to
a letter agreement between the FIS special committee and
Stephens, FIS agreed to pay Stephens, upon the rendering of a
fairness opinion, a fee for such services. In addition, Stephens
was engaged as a financial advisor in connection with the
proposed transaction, and FIS has agreed, if the proposed
transaction is consummated, to pay Stephens a success fee.
Stephens will also be reimbursed for its
out-of-pocket
expenses. In addition, FIS has agreed to indemnify Stephens for
liabilities related to or arising out of the engagement.
Opinion
of FNFs Financial Advisor
On June 25, 2006, Bear Stearns delivered its oral opinion
to the FNF special committee, which was subsequently confirmed
in writing, that, as of, June 25, 2006, and based upon and
subject to the assumptions, qualifications and limitations set
forth in the written opinion, the original conversion ratio, the
original FNT exchange number and the spin-off, taken as a whole,
were fair from a financial point of view to FNF and the
stockholders of FNF.
The full text of Bear Stearns written opinion is attached
as Annex E to this proxy statement/prospectus and you
should read the opinion carefully and in its entirety. The
opinion sets forth the assumptions made, the matters considered
and qualifications and limitations of the review undertaken by
Bear Stearns. The Bear Stearns opinion is subject to the
assumptions and conditions contained in the opinion and is
necessarily based on economic, market and other conditions and
the information made available to Bear Stearns as of the date of
the Bear Stearns opinion, and Bear Stearns assumes no
responsibility for updating or revising its opinion based on
circumstances or events occurring after the date of its opinion.
In the course of performing its review and analyses for
rendering its opinion, Bear Stearns:
|
|
|
|
|
reviewed the original merger agreement and the original
distribution agreement;
|
|
|
|
|
|
reviewed FNFs Annual Reports to Shareholders and Annual
Reports on
Form 10-K
for the years ended December 31, 2003, 2004, and 2005, its
Quarterly Reports on
Form 10-Q
for the period ended March 31, 2006, and its Current
Reports on
Form 8-K
filed since December 31, 2005;
|
59
|
|
|
|
|
reviewed FISs Annual Report on
Form 10-K
for the year ended December 31, 2005 and its Quarterly
Report on
Form 10-Q
for the period ended March 31, 2006, and its Current
Reports on
Form 8-K
filed since February 1, 2006;
|
|
|
|
reviewed FNTs Registration Statement on
Form S-1
filed on July 6, 2005 and all amendments thereto, its
Annual Report to Shareholders and Annual Report on
Form 10-K
for the year ended December 31, 2005, its Quarterly Report
on
Form 10-Q
for the period ended March 31, 2006, and its Current
Reports on
Form 8-K
filed since December 31, 2005;
|
|
|
|
reviewed certain operating and financial information relating to
the businesses, operations, strategy, financial results, and
prospects of FNF, FIS and FNT, and of the entities, which we
refer to as the subject companies, the equity securities of
which are to be contributed to FNT as part of the asset
contribution under the distribution agreement, which we refer to
as the asset contribution, all as prepared and provided to Bear
Stearns by management of FNF, FIS, FNT, and the subject
companies, respectively, or obtained by Bear Stearns from public
sources;
|
|
|
|
met with certain members of the managements of FNF and the
subject companies to discuss their respective businesses,
operations, financial results, and future prospects;
|
|
|
|
reviewed the historical prices, trading multiples, and trading
volumes of the common shares of FNF, FIS, and FNT;
|
|
|
|
reviewed publicly available financial data, stock market
performance data, and trading multiples of companies which Bear
Stearns deemed generally comparable to FIS, FNT, and certain of
the subject companies;
|
|
|
|
reviewed the terms of recent mergers and acquisitions involving
companies which Bear Stearns deemed generally comparable to FIS,
FNT, and certain of the subject companies;
|
|
|
|
performed discounted cash flows on the projections furnished to
Bear Stearns for certain of the subject companies; and
|
|
|
|
conducted such other studies, analyses, inquiries, and
investigations as Bear Stearns deemed appropriate.
|
For purposes of its analysis, Bear Stearns relied upon and
assumed, without independent verification, the accuracy and
completeness of the financial and other information provided to
or discussed with Bear Stearns by FNF, FIS and FNT or obtained
by Bear Stearns from public sources. Bear Stearns did not assume
any responsibility for the independent verification of any such
information, and Bear Stearns further relied upon the assurances
of the senior management of each of FNF, FIS, FNT, and the
subject companies that they are unaware of any facts that would
make the information incomplete or misleading.
In arriving at its opinion, Bear Stearns did not perform or
obtain any independent appraisal of the assets or liabilities
(contingent or otherwise) of FNF, FIS, or FNT (including, but
not limited to, the assets, which we refer to as the contributed
assets, of FNF to be contributed to FNT as part of the asset
contribution under the original distribution agreement and the
liabilities of FNF, which we refer to as the assumed
liabilities, to be assumed by FNT under the original
distribution agreement), nor was Bear Stearns furnished with any
such appraisals. The contributed assets and the assumed
liabilities collectively are referred to in the proxy
statement/prospectus as the transferred business.
In rendering its opinion, Bear Stearns analyzed the merger as a
strategic business combination not involving a sale of control
of FNF, and Bear Stearns did not solicit, nor was Bear Stearns
asked to solicit, third party acquisition interest in FNF or in
any of FIS, FNT, or any of the transferred business. In
addition, Bear Stearns did not evaluate the solvency or fair
value of FNF, FNT, FIS, or any business included in the
transferred business under any state or federal laws relating to
bankruptcy, insolvency or similar matters. Bear Stearns assumed
that the merger will qualify as a tax-free
reorganization within the meaning of
Section 368(a) of the Code and that the spin-off will
qualify as a tax-free transaction under Section 355 of the
Code. Bear Stearns assumed that the transactions contemplated by
the original distribution agreement and the original merger
agreement will be consummated in a timely manner and in
accordance with the terms thereof without any limitations,
restrictions, conditions, amendments or modifications,
60
regulatory or otherwise, that collectively would have a material
effect on FNF, FIS, FNT, or the transferred business. Bear
Stearns further assumed that the distribution would comply with
all applicable U.S. federal and state laws and foreign
laws, including, without limitation, laws relating to the
payment of dividends, bankruptcy, insolvency, reorganization,
fraudulent conveyance, fraudulent transfer, and other similar
laws affecting the rights of creditors.
Bear Stearns did not express any opinion as to the price or
range of prices at which the shares of common stock of FNF, FIS,
or FNT may trade subsequent to the announcement or consummation
of the transactions.
The following is a brief summary of the material financial
analyses performed by Bear Stearns and presented to the FNF
special committee in connection with rendering its fairness
opinion. The following summary, however, does not purport to be
a complete description of the financial analyses performed by
Bear Stearns, and the order of analyses described does not
represent the relative importance or weight given to the
analyses performed by Bear Stearns.
Some of the financial analyses summarized below include summary
data and information presented in tabular format. In order to
understand fully the financial analyses, the summary data and
tables must be read together with the full text of the analyses.
Considering the summary data and tables alone could create a
misleading or incomplete view of Bear Stearns financial
analyses.
Bear Stearns estimated the
sum-of-the-parts
value for the FNF common stock. This analysis included an
estimate of the values for each of FIS and FNT and the
contributed assets. The contributed assets consist of FNFs
specialty insurance businesses, including flood insurance,
homeowners insurance, home warranty insurance, Disclosure
Source, its approximate 40% interest in Sedgwick CMS, and
certain other miscellaneous assets. FIS, FNT and the transferred
business were valued using the methodologies discussed below.
This analysis indicated that the
sum-of-the-parts
per share of FNF common stock was greater than (i) the
closing price for FNF common stock on April 24, 2006 (the
trading day prior to the announcement of the transactions
contemplated by the original distribution agreement and the
original merger agreement), which we refer to as the
pre-announcement trading price, and (ii) the average market
value for FNF common stock for the period between
February 1, 2006 (the closing date of the merger between
FIS and Certegy, Inc.) and April 24, 2006, which we refer
to as the average trading price.
Bear Stearns also compared the pre-announcement trading price
and the average trading price to the closing price for the FNF
common stock on April 27, 2006, the date of the
announcement, and to the average of selected Wall Street
research analyst
52-week
stock price targets for the FNF common stock as of June 23,
2006. Additionally, Bear Stearns compared the pre-announcement
trading price, the average trading price, and the theoretical
(no holdco discount) sum of the parts value of FNF, assuming
(i) FNT shares trade at a median EPS multiple in line with
the comparable companies, which is referred to as the FNT
comparable value, (ii) FIS shares trade at its current 2006
cash net income multiple and (iii) the transferred business
is valued at the mid-point of the reference range described
below at $1.015 billion (assuming 184.0 million fully
diluted FNF shares outstanding and the residual cash balance of
$29.5 million is distributed to FNF stockholders), to
estimates of the pro-forma market value of the FNT and FIS
common stock to be received by FNF stockholders in the spin-off
and the merger assuming (i) FNT shares trade at the FNT
comparable value, more fully described below, and (ii) FIS
trades at its current 2006 cash net income multiple. Bear
Stearns also compared the pre-announcement trading price, the
average trading price, and the theoretical (no holdco discount)
sum of the parts value of FNF, to estimates of the pro forma
market value of the FNT and FIS common stock to be received by
FNF stockholders in the spin-off and the merger assuming
(i) FNT shares trade at the weighted average of the median
multiples of EPS of the comparable companies and the multiple
implied by the earnings of the transferred business, which is
referred to as the blended value, more fully described below,
and (ii) the FIS shares trade in line with the median cash
net income multiple of the comparable companies, which is
referred to as the FIS comparable value, as described below.
These analyses demonstrated that these pro forma valuations of
the FNF common stock and the FIS common stock to be received by
FNF stockholders in the spin-off and the merger were higher than
both the pre-announcement trading price and the average trading
price and were essentially greater than or equal to the
theoretical (no holdco discount) sum of the parts value of FNF.
61
Fairness of Exchange Ratio in the Merger. Bear
Stearns reviewed eight completed
step-up
spin-offs of majority owned publicly traded subsidiaries that
were completed since 1995. Although the combination of FNF and
FIS is structured as a merger, Bear Stearns concluded that the
step-up
spin-offs listed below were highly relevant precedent
transactions. The following table identifies the eight
step-up
spin-offs reviewed by Bear Stearns.
|
|
|
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Precedent Step-Up Spin-Offs
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Parent Econ.
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Parent Econ.
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Date
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Ownership
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Ownership
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Share to Share
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Closed
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Parent Company
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Subsidiary
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Pre-Spin
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Post-Spin
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Exchange Ratio
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1/30/04
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Centex Corp.
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Eagle Materials, Inc.
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64%
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0%
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1:1
|
11/29/01
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|
Unitrin Inc.
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Curtiss-Wright Corp.
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54%
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0%
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|
1:1
|
10/10/00
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|
St. Joe Co.
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Florida East Coast Industries, Inc.
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54%
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|
0%
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|
1:1
|
6/20/00
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|
Silicon Graphics, Inc.
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MIPS Technologies, Inc.
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67%
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|
0%
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|
1:1
|
10/22/99
|
|
Harcourt General, Inc.
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The Neiman Marcus Group, Inc.
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54%
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|
10%
|
|
1:1
|
7/27/99
|
|
IMS Health, Inc.
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|
Gartner, Inc.
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|
47%
|
|
7%
|
|
1:1
|
10/02/95
|
|
Peter Kiewit Sons, Inc.
|
|
MFS Communications Co.
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67%
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|
0%
|
|
1:1
|
7/15/95
|
|
Freeport McMoRan Inc.
|
|
Freeport McMoRan Copper &
Gold Inc.
|
|
68%
|
|
0%
|
|
1:1
|
Bear Stearns also identified two completed distributions of
minority-owned publicly traded subsidiaries that were structured
like the merger. These transactions were the spin-off of Seagate
Technology (33% owned by Veritas Software) on November 21,
2000 and the spin-off of Petrie Stores (14% owned by Toys
R Us) on November 29, 2001. The exchange ratio
in each of these transactions was set at a discount for the
large shareholder (14.6% in the case of Seagate Technology and
8.2% in the case of Petrie Stores).
Bear Stearns noted that all of the precedent transactions
identified above occurred at parity or a discount. It found no
example of a parent company in a similar situation to the merger
obtaining a control premium from the public.
Pro-Forma Valuation of FIS for Purposes of the Sum of the
Parts Valuation. Bear Stearns compared certain
operating, financial, trading, and valuation information for FIS
to certain publicly available operating, financial, trading, and
valuation information for seven selected companies, which in
Bear Stearns judgment, were reasonably comparable to FIS
for purposes of this analysis. The comparable companies were
selected because they offer products and services similar to
those of FIS. These companies were:
|
|
|
|
|
First Data Corporation
|
|
|
|
Fiserv, Inc.
|
|
|
|
Alliance Data Systems Corporation
|
|
|
|
Checkfree Corporation
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|
|
|
Global Payments Inc.
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|
|
|
Jack Henry & Associates, Inc.
|
|
|
|
Open Solutions Inc.
|
For each of FIS and the comparable companies listed above, Bear
Stearns analyzed multiples of enterprise value (which is
referred to as EV and is calculated as the sum of the value of
the common equity on a fully diluted basis and the value of net
debt, any minority interest and preferred stock) divided by
estimated earnings before interest, income taxes, depreciation
and amortization, which is referred to as EBITDA, for the
calendar years ending December 31, 2006 and 2007. Bear
Stearns also analyzed multiples of each companys stock
price divided by (i) estimated earnings per share, which is
referred to as EPS, and (ii) estimated cash earnings per
shares, which is referred to as CPS, in each case for the
calendar years ending December 31, 2006 and 2007. Further,
Bear Stearns
62
analyzed each companys price to CPS ratio divided by its
estimated long-term earnings growth, which is referred to as
Cash PEG, for the calendar year ending December 31, 2006
and each companys estimated cost of equity, which is
referred to as cost of equity. This analysis was compiled using
First Call consensus Wall Street research estimates of EBITDA,
EPS, CPS, and long-term earnings growth for the calendar years
ending December 31, 2006 and 2007 (as applicable). Cost of
equity was computed for each company based on the interpolated
yield on the
20-year US
Treasury bond of 5.24% as of June 17, 2006 as reported by
Bloomberg, Barra Betas as of May 31, 2006, and an equity
risk premium of 6.04% and market capitalization size premiums as
reported by Ibbotson Associates. Bear Stearns calculated the
following range of multiples for the above comparable public
companies:
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|
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|
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Harmonic
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Multiple
|
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FIS
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|
|
Mean
|
|
|
Median
|
|
|
Mean(1)
|
|
|
EV/2006E EBITDA
|
|
|
9.8
|
x
|
|
|
11.2
|
x
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|
|
11.1
|
x
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|
|
10.9x
|
|
EV/2007E EBITDA
|
|
|
8.0
|
x
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|
|
10.2
|
x
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|
|
10.4
|
x
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|
|
10.0x
|
|
Price/2006E EPS
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|
|
20.4
|
x
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|
|
23.1
|
x
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|
23.4
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x
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22.1x
|
|
Price/2007E EPS
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|
|
17.0
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x
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19.5
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x
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|
|
18.4
|
x
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|
|
18.9x
|
|
Price/2006E CPS
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|
|
16.9
|
x
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|
|
20.2
|
x
|
|
|
17.7
|
x
|
|
|
19.4x
|
|
Price/2007E CPS
|
|
|
14.5
|
x
|
|
|
17.6
|
x
|
|
|
15.5
|
x
|
|
|
17.0
|
|
Cash PEG 2006E
|
|
|
1.36
|
x
|
|
|
1.19
|
x
|
|
|
1.19
|
x
|
|
|
1.11
|
|
Cost of Equity
|
|
|
11.3
|
%
|
|
|
12.4
|
%
|
|
|
12.8
|
%
|
|
|
NA
|
|
|
|
|
(1) |
|
Harmonic mean excludes FIS. The harmonic mean is a specialized
average computed as the reciprocal of the arithmetic mean of the
reciprocals of the values. |
Based on the selected comparable company analysis and the
twelve-month EBITDA and CPS Wall Street estimates for FIS for
calendar year 2006, Bear Stearns derived an implied FIS share
price range of $32.00 to $47.00 utilizing 9.0-12.0x 2006
EV/EBITDA and 17.0 to 22.0x 2006 Price/CPS. Based on the
selected comparable company analysis and the twelve month EBITDA
and CPS Wall Street estimates for FIS for calendar year 2007,
Bear Stearns derived an implied FIS share price range of $35.50
to $51.00 utilizing 8.0-10.5x 2007 EV/EBITDA and 15.0 to 19.0x
2007 Price/CPS. Bear Stearns noted that the historical trading
range for the FIS common stock since the announcement of the
FIS-Certegy merger on September 15, 2005 through
June 23, 2006 was $35.15 to $43.45, which is within the
range of implied values based on the selected comparable company
analysis.
For purposes of the sum of the parts valuation, Bear Stearns
noted that FIS shares trade at a 16.9x cash net income multiple,
based on the closing price of the common stock on June 23,
2006, which is referred to as the current value. Bear Stearns
derived an implied value of an FIS share for these purposes
based on the assumption that FIS trades in line with the median
multiple of its comparables (17.7x 2006E CPS), which is referred
to as the FIS comparable value. Applying a conversion ratio of
0.538 shares of FIS common stock for each outstanding share
of FNF common stock, the implied value of the FIS shares to be
distributed in the merger at the current value is
$19.22 per FNF common share (implying a value of
$35.76 per FIS share) and the implied value of the shares
of FIS common stock to be issued in the merger at the FIS
comparable value is $20.13 per FNF common share (implying a
value of $37.44 per FIS share). Bear Stearns noted that
both the current value and the comparable value are within the
range of implied share prices for the FIS common stock derived
as described in the preceding paragraph.
Pro Forma Valuation of FNT for Purposes of the Sum of the
Parts Valuation. Bear Stearns compared certain operating,
financial, trading, and valuation information for FNT to certain
publicly available operating, financial, trading, and valuation
information for three selected companies, which in Bear
Stearns judgment, were reasonably comparable to FNT for
purposes of this analysis. The comparable companies were
selected because they offer products and services similar to
those of FNT. These companies were:
|
|
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|
|
The First American Corporation
|
|
|
|
LandAmerica Financial Group Incorporated
|
|
|
|
Stewart Information Services Corporation
|
63
For each of FNT and the comparable companies listed above, Bear
Stearns analyzed the price to EPS ratios for the calendar years
ending December 31, 2006 and 2007; the long-term growth
rate in First Call earnings per share estimates, which is
referred to as LTGR; cost of equity; price to EPS ratio to its
earnings growth rate (which is referred to as PEG) for the
calendar years ending December 31, 2006 and 2007; dividend
yield (computed by dividing the stock price on June 23,
2006 by the annualized dividend based on the most recent
dividend); long-term growth rate plus its dividend yield; stock
price divided by book value; and title insurance revenue as a
percentage of total revenue. This analysis was compiled using
First Call consensus Wall Street research estimates of EPS and
long-term growth rate for the calendar years ending
December 31, 2006 and 2007 (as applicable). Cost of equity
was computed for each company based on the interpolated yield on
the 20-year
US Treasury bond of 5.24% as of June 17, 2006 as reported
by Bloomberg, Barra Betas as of May 31, 2006, and an equity
risk premium of 6.04% and market capitalization size premiums as
reported by Ibbotson Associates. Bear Stearns calculated the
following range of multiples for the above comparable public
companies:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Harmonic
|
|
Multiple
|
|
FNT
|
|
|
Mean
|
|
|
Median
|
|
|
Mean(1)
|
|
|
Price/2006E EPS
|
|
|
7.2
|
x
|
|
|
9.6
|
x
|
|
|
9.8
|
x
|
|
|
9.6x
|
|
Price/2007E EPS
|
|
|
7.2
|
x
|
|
|
8.8
|
x
|
|
|
9.0
|
x
|
|
|
9.6x
|
|
First Call LTGR
|
|
|
9.0
|
%
|
|
|
9.5
|
%
|
|
|
9.0
|
%
|
|
|
NA
|
|
Cost of Equity
|
|
|
11.0
|
|
|
|
11.9
|
%
|
|
|
12.2
|
%
|
|
|
NA
|
|
PEG 2006E
|
|
|
0.80
|
x
|
|
|
1.03
|
x
|
|
|
1.09
|
x
|
|
|
1.01x
|
|
PEG 2007E
|
|
|
0.80
|
x
|
|
|
0.95
|
x
|
|
|
0.92
|
x
|
|
|
0.93x
|
|
Dividend Yield
|
|
|
5.6
|
%
|
|
|
1.7
|
%
|
|
|
1.8
|
%
|
|
|
NA
|
|
LTGR plus Div. Yield
|
|
|
14.6
|
%
|
|
|
11.2
|
%%
|
|
|
11.0
|
%
|
|
|
NA
|
|
Price/Book Value
|
|
|
1.4
|
x
|
|
|
1.0
|
x
|
|
|
0.9
|
x
|
|
|
1.0x
|
|
Title Revenue as a % of Co.
Revenue
|
|
|
96.8
|
%
|
|
|
87.3
|
%
|
|
|
92.4
|
%
|
|
|
NA
|
|
|
|
|
(1) |
|
Harmonic mean excludes FIS. The harmonic mean is a specialized
average computed as the reciprocal of the arithmetic mean of the
reciprocals of the values. |
Based on the selected comparable company analysis and the
twelve-month Wall Street EPS estimates for FNT for the calendar
years ended December 31, 2006 and 2007, Bear Stearns
derived an implied an FNT share price range of $26.00 to $28.50
(utilizing a 9.0-10.0x 2006E EPS multiple) and an implied FNT
share price range of $23.50 to $26.50 (utilizing a 8.25-9.25x
2007E EPS multiple).
For purposes of the sum of the parts valuation, Bear Stearns
derived an implied value of an FNT share after the contribution
by FNF to FNT of the transferred business based on the sum of
(a) the value of FNTs pro forma 2006E EPS based on
the median multiple of its comparables (9.8x 2006E EPS) and
(b) the value attributed to the non-earning assets of the
transferred business. This is referred to as the FNT comparable
value. Bear Stearns also derived an implied value of an FNT
share after the contribution by FNF to FNT of the transferred
business based on the sum of (a) the value of FNTs
pro forma 2006E EPS based on a 10.2x multiple, which is the
weighted average of the median multiple of the comparable
companies (9.8x 2006E EPS) and the multiple implied by the
earnings of the transferred business (11.7x 2006E EPS), and
(b) the value attributed to the non-earning assets of the
transferred business. This is referred to as the blended value.
Assuming that 1.056 shares of FNT stock are distributed in
the spin-off under the distribution agreement on each share of
FNF common stock, the implied value of the FNT shares to be
distributed in the spin-off at the comparable value is
$27.11 per share of FNF common stock (implying a value of
$25.68 per FNT share) and the implied value of the FNT
shares to be distributed in the spin-off at the blended value is
$28.23 per share of FNF common stock (implying a value of
$26.74 per FNT share). Bear Stearns noted that both the FNT
comparable value and the blended value are within the range of
implied share prices for the FNT common stock derived as
described above.
Bear Stearns reviewed 15 selected comparable precedent merger
and acquisition transactions (which are referred to as the
comparable transactions) completed since 1998. However,
valuation data are publicly available for only four of the
comparable transactions. In light of the limited valuation data
and the highly cyclical nature of the
64
industry in which FNT competes, the use of comparable
transaction data was determined by Bear Stearns as not being a
very meaningful valuation tool in the context of its opinion.
Pro Forma Valuation of the Other Businesses for Purposes of
the Sum of the Parts Valuation. Bear Stearns
employed a variety of valuation methodologies in valuing the
seven principal businesses included in the transferred business,
including: comparable company trading analyses (based on
multiples of 2006 and 2007 estimated net income or normalized
net income, multiples of 2006 and 2007 estimated EBITDA and
normalized EBITDA and multiples of book value); comparable
transaction analyses; historical cost basis and book value; and
discounted cash flow. The particular methodology used in any
particular case was determined based on the nature of the
business and the availability and relevance of valuation data.
Based on its analysis, Bear Stearns derived an implied value for
the transferred business of between $900 million and
$1.130 billion.
Bear Stearns also analyzed the implied value of the transferred
business in comparison with the implied value of the FNT stock
received by FNF as part of the asset contribution pursuant to
the distribution agreement. Bear Stearns derived an implied
value of the FNT stock to be received by FNF as part of the
asset contribution of between $940 million and
$1.175 billion. The value at the lower end of the range is
based on the closing price of the FNT stock of $20.55 on
June 23, 2006. The value at the upper end of the range
assumes that FNT will trade at the comparable value of $25.68.
Bear Stearns noted that the implied value of the FNT stock to be
received is greater than the implied value of the transferred
business at both the lower end and upper end of the range.
The preparation of a fairness opinion is a complex process and
involves various judgments and determinations as to the most
appropriate and relevant assumptions and financial analyses and
the application of those methods to the particular circumstances
involved. Such an opinion is therefore not readily susceptible
to partial analysis or summary description, and taking portions
of the analyses set out above, without considering the analysis
as a whole, would create an incomplete and misleading picture of
the processes underlying the analyses considered in rendering
the Bear Stearns opinion. Bear Stearns based its analysis on
assumptions that it deemed reasonable, including assumptions
concerning general business and economic conditions and
industry-specific factors. Bear Stearns did not form an opinion
as to whether any individual analysis or factor, whether
positive or negative, considered in isolation, supported or
failed to support the Bear Stearns opinion. In arriving at its
opinion, Bear Stearns considered the results of all its analyses
and did not attribute any particular weight to any one analysis
or factor. Bear Stearns arrived at its ultimate opinion based on
the results of all analyses undertaken by it and assessed as a
whole and believes that the totality of the factors considered
and analyses performed by Bear Stearns in connection with its
opinion operated collectively to support its determination as to
the fairness, from a financial point of view, to FNF and the
stockholders of FNF of the original conversion ratio, the
original FNT exchange number and the spin-off, taken as a whole.
The analyses performed by Bear Stearns, particularly those based
on estimates and projections, are not necessarily indicative of
actual values or actual future results, which may be
significantly more or less favorable than suggested by such
analyses.
None of the public companies used in the comparable company
analysis described above are identical to FNF, FIS, FNT or the
subject companies, and none of the precedent transactions used
in the precedent transactions analysis described above are
identical to the spin-off or the merger. Accordingly, an
analysis of publicly traded comparable companies and comparable
precedent transactions is not mathematical; rather it involves
complex considerations and judgments concerning the differences
in financial and operating characteristics of the companies and
precedent transactions and other factors that could affect the
value of FNF, FIS, FNT, or the transferred business and the
public trading values of the companies and precedent
transactions to which they were compared. The analyses do not
purport to be appraisals or to reflect the prices at which any
securities may trade at the present time or at any time in the
future.
The form and amount of consideration payable in the spin-off and
the merger were determined through negotiations between FNF, FIS
and FNT, and were approved by the board of directors of FNF. The
Bear Stearns opinion was just one of the many factors taken into
consideration by FNFs board of directors. Consequently,
Bear Stearns analysis should not be viewed as
determinative of the decision of FNFs board of directors
with respect to the fairness of the consideration to be received
by holders of FNF common stock.
Pursuant to the terms of Bear Stearns engagement letter,
FNF has agreed to pay Bear Stearns a cash fee of
$10 million, payable upon completion of the merger. In
addition, a fee of $2 million was payable to Bear Stearns
65
upon rendering of its fairness opinion, which will be credited
against the fee payable upon completion of the merger. FNF has
also agreed to reimburse Bear Stearns for reasonable
out-of-pocket
expenses incurred by Bear Stearns in connection with its
engagement and the transactions contemplated by the merger
agreement, including reasonable fees and disbursements of its
legal counsel. FNF has agreed to indemnify Bear Stearns against
certain liabilities arising out of or in connection with Bear
Stearns engagement.
Bear Stearns has been previously engaged by FNF and FIS and by
Thomas H. Lee Partners, Texas Pacific Group and Evercore Capital
Partners and their affiliates, who have ownership positions in
certain affiliates of FNF, to provide certain investment banking
and other services for which Bear Stearns received customary
fees. Cary H. Thompson, a Senior Managing Director of Bear
Stearns, serves on the boards of directors of FNF and FIS. In
the ordinary course of business, Bear Stearns and its affiliates
may actively trade the equity and debt securities and/or bank
debt of FNF, FIS and/or FNT and their respective affiliates for
its own account and for the account of its customers and,
accordingly, may at any time hold a long or short position in
such securities or bank debt.
Interests
of Directors and Executive Officers in the Merger
Certain members of the FIS and FNF boards of directors and
executive officers of FIS and FNF, in their capacities as such,
have certain interests in the merger that are in addition to or
different from their interests as FIS and FNF stockholders
generally. Both FISs and FNFs board of directors
were aware of these interests and considered them, among other
matters, in approving the merger agreement and the transactions
contemplated thereby.
Employment
and Compensation Matters
William P. Foley, II, the chairman of FISs board of
directors, is also the chairman of the board of directors and
chief executive officer of FNF and the Chairman of FNTs
board. In connection with the proposed transactions,
Mr. Foley will become FISs Executive Chairman and the
Chief Executive Officer of FNT.
In connection with the proposed transactions, FIS will enter
into a new employment agreement with Mr. Foley, the
proposed terms of which are described below, and he will also
receive a grant of 830,000 options to purchase shares of
FISs common stock, with 3 year graded vesting (1/3
each year) and a 7 year term, immediately following the
merger. Additionally, Mr. Foley currently holds 5,408,216
options to purchase FNF common stock, a portion of which will be
converted into options to purchase FIS or FNT stock as described
below, although 3,856,684 of such options will be exercised or
cashed out prior to the spin-off pursuant to the terms of the
option letter agreement among FNF, William P. Foley, II,
Alan L. Stinson and Brent B. Bickett. See The Merger
Agreement Principal Covenants and
Agreements Other Covenants and
Agreements Option Letter beginning on
page 81. In addition, Mr. Foley owns, in the
aggregate, 5,752,040 shares including 110,000 restricted
shares of FNF common stock and will receive shares of FISs
common stock, with the shares received in respect of restricted
stock to be subject to the same terms, conditions and
restrictions, in respect thereof in connection with the merger.
Other officers and directors of FNF and FIS also own shares of
FNF stock, FNF options and restricted stock that will be
similarly treated in connection with the merger.
FISs compensation committee has approved the terms of an
employment agreement with Mr. Foley. Pursuant to the agreement,
Mr. Foley will serve as FISs Executive Chairman.
Mr. Foley will receive an annual base salary of $500,000,
with an annual cash bonus opportunity equal to 300% of his
annual base salary. In the event of a termination of
Mr. Foleys employment by FIS for any reason other
than cause or disability, or in the event of a termination by
Mr. Foley for good reason or for any reason during the
6-month
period immediately following a change in control, he will
receive (i) any accrued obligations, (ii) a prorated
annual bonus, (iii) a lump-sum payment equal to 300% of the
sum of his (x) annual base salary and (y) the highest
annual bonus paid to him within the 3 years preceding his
termination, (iv) immediate vesting
and/or
payment of all FIS equity awards, and (v) continued receipt
of life and health insurance benefits for a period of
3 years, reduced by comparable benefits he may receive from
another employer. The agreement expressly provides that no event
or transaction which is entered into, is contemplated by, or
occurs as a result of the distribution agreement or the merger
agreement between FNF and FIS will constitute a change in
control under the agreement. It is intended that FIS will also
enter in employment agreements with certain other FIS executive
officers who, along with Mr. Foley, will serve as executive
officers of
66
both FIS and FNT. Specifically, FIS will enter into an
employment agreement immediately following the spin-off with
Brent B. Bickett and with Alan L. Stinson, both of whom will
serve as dual executive officers. With respect to each of
Messrs. Bickett and Stinson, the FIS compensation committee
has approved an annual base salary of $300,000, with an annual
cash bonus opportunity equal to 150% of his annual base salary.
In addition, Messrs. Bickett and Stinson will each receive
a grant of 230,000 options to purchase shares of FIS common
stock, with 3 year graded vesting (1/3 each year) and a
7 year term, immediately following the merger.
Also in connection with the proposed transactions, FNT will
enter into a new employment agreement with Mr. Foley, the
proposed terms of which are described below, and he will also
receive a grant of 475,000 shares of FNT restricted stock.
FNTs compensation committee has approved the terms of an
employment agreement with Mr. Foley, which agreement will become
effective immediately following the spin-off. Pursuant to the
agreement, Mr. Foley will serve as FNTs Chief
Executive Officer. Mr. Foley will receive an annual base
salary of $500,000, with an annual cash bonus opportunity equal
to 300% of his annual base salary. In the event of a termination
of Mr. Foleys employment by FNT for any reason other
than cause or disability, or in the event of a termination by
Mr. Foley for good reason or for any reason during the
6-month
period immediately following a change in control, he will
receive (i) any accrued obligations, (ii) a prorated
annual bonus, (iii) a lump-sum payment equal to 300% of the
sum of his (x) annual base salary and (y) the highest
annual bonus paid to him within the 3 years preceding his
termination, (iv) immediate vesting
and/or
payment of all FNT equity awards, and (v) continued receipt
of life and health insurance benefits for a period of
3 years, reduced by comparable benefits he may receive from
another employer. The agreement expressly provides that no event
or transaction which is entered into, is contemplated by, or
occurs as a result of the distribution agreement or the merger
agreement between FNF and FIS will constitute a change in
control under the agreement. It is intended that FNT will also
enter in employment agreements with certain other FNT executive
officers who, along with Mr. Foley, will serve as executive
officers of both FNT and FIS. Specifically, FNT will enter into
an employment agreement immediately following the spin-off with
Alan L. Stinson and with Brent B. Bickett, both of whom will
serve as dual executive officers. With respect to each of
Messrs. Bickett and Stinson, the FNT compensation committee
has approved an annual base salary of $300,000, with an annual
cash bonus opportunity equal to 150% of his annual base salary.
In addition, Messrs. Bickett and Stinson will each receive
a grant of 130,000 shares of FNT restricted stock, with
3 year graded vesting (1/3 each year), immediately
following the spin-off.
Under the distribution agreement, FNT has agreed to indemnify
each person who, prior to the closing, was an officer or
director of FNF to the same extent that such officer or director
was indemnified by FNF under FNFs charter and by-laws. FNT
will also purchase and maintain for at least six years after
date of closing a directors and officers insurance
policy insuring directors, officers and employees of FNF and its
subsidiaries (but not directors, officers or employees of FIS
and its subsidiaries acting in their capacity as such) and
providing coverage at least as favorable to the insured persons
as FNFs current directors and officers
insurance.
In addition, the FNF Compensation Committee is evaluating paying
transaction bonuses to a group of officers of FNF, including
Messrs. Foley, Stinson, and Bickett. The purpose of the
transaction bonus is to reward certain officers for their
efforts towards successful completion of the merger and the
proposed transactions. The merger is the final step of
FNFs long-term strategy, which has included previous
acquisitions (Alltel Information Services for example) and
reorganizations. The result of FNFs long-term strategy has
been the creation of significant value for shareholders and a
rate of return that has consistently exceeded that of the
S&P 500 since 1987. If FNF shareholders approve the proposed
transactions and the Committee is confident that the
transactions will close, the Committee will grant the
transaction bonuses (the bonuses would be paid just prior to the
closing of the spin-off). Although no bonus will actually be
granted by the Committee until shortly prior to the spin-off,
the Committee currently would expect to award Mr. Foley a
bonus of $19.0 million and Messrs. Stinson and Bickett
each a bonus of $2.2 million. The other officers would
receive aggregate bonuses of $1.6 million. The FNF special
committee has reviewed the proposed transaction bonuses and
approved the grant thereof in connection with the transaction.
FISs
Board of Directors After the Merger
Richard N. Massey, who is currently a member of the FNF board of
directors, will join the FIS board of directors upon
consummation of the merger as a member of the class of directors
whose terms expire in 2007. Mr. Massey is currently
Executive Vice President and General Counsel of Alltel
Corporation and has been since
67
January 2006. From 2000 until 2006 Mr. Massey served as
Managing Director of Stephens, a private investment bank, during
which time his financial advisory practice focused on software
and information technology companies.
FIS
Executive Officers after the Merger
The following sets forth the expected position of each
individual effective upon the completion of the merger:
|
|
|
|
|
Expected Position with
|
Name and Age
|
|
FIS after the Merger
|
|
William P. Foley, II
|
|
Executive Chairman
|
Lee A. Kennedy
|
|
President and Chief Executive
Officer
|
Brent B. Bickett
|
|
Executive Vice President,
Strategic Planning
|
Jeffrey S. Carbiener
|
|
Executive Vice President and Chief
Financial Officer
|
Michael L. Gravelle
|
|
Executive Vice President, Legal
|
Gary A. Norcross
|
|
Executive Vice President,
Integrated Financial Solutions
|
Fred Parvey
|
|
Executive Vice President and Chief
Information Officer
|
Peter T. Sadowski
|
|
Executive Vice President, Legal
|
Frank R. Sanchez
|
|
Executive Vice President,
Enterprise Banking Solutions
|
Michael A. Sanchez
|
|
Executive Vice President,
International
|
Dan Scheuble
|
|
Executive Vice President, Mortgage
Processing Services
|
Ernie D. Smith
|
|
Executive Vice President
|
Eric Swenson
|
|
Executive Vice President, Lender
Processing Services
|
Brian Hershkowitz
|
|
Executive Vice President, Lender
Processing Services
|
Alan L. Stinson
|
|
Executive Vice President, Finance
|
Information about the current FIS and FNF executive officers can
be found in each companys Annual Report on
Form 10-K/A
for the year ended December 31, 2005, incorporated by
reference into this proxy statement/prospectus. See Where
You Can Find More Information beginning on page 1.
FNT Board
of Directors after the Spin-off
Douglas K. Ammerman, Thomas M. Hagerty, Daniel D. Lane and Cary
H. Thompson, each of whom is a member of FNFs board of
directors, will each join the FNT board of directors upon
completion of the spin-off. Each non-employee director of FNT
will receive a grant of FNT restricted stock upon completion of
the spin-off.
Accounting
Treatment
U.S. generally accepted accounting principles require that one
of the two parties to the merger be designated as the acquirer
for accounting purposes. However, Financial Accounting Standards
Board Technical
Bulletin 85-5,
Issues Relating to Accounting for Business
Combinations provides that if a transaction lacks
substance, it is not a purchase event and should be accounted
for based on existing carrying amounts. In the proposed
transaction, because the minority interest of FIS does not
change and in substance the only assets and liabilities of the
combined entity after the exchange are those of FIS prior to the
exchange, a change in ownership of the minority interest has not
taken place, and the exchange should be accounted for based on
the carrying amounts of FISs assets and liabilities. FIS
believes that in the merger there is no change in the value held
by the existing minority interest shareholders and the only
assets and liabilities of the combined entity after the
transaction are those owned by FIS prior to the transaction and
therefore the merger should be accounted for at historical cost.
68
Dissenters
Rights
FIS
Shareholders
Under the Georgia Business Corporation Code, which we refer to
as the GBCC, the holders of FIS common stock are not entitled to
dissenters rights with respect to the merger.
FNF
Stockholders
Under the Delaware General Corporate Law, which we refer to as
the DGCL, the holders of FNF common stock are not entitled to
dissenters rights in connection with the merger.
Delisting
and Deregistration of FNF Common Stock
If the merger is completed, FNF common stock will be delisted
from the NYSE and will be deregistered under the Exchange Act
and FNF will no longer be required to file periodic and other
reports with the SEC. The FNF stockholders will become FIS
shareholders and their rights as shareholders will be governed
by applicable Georgia law and by FISs articles of
incorporation and bylaws. See Comparison of Shareholder
Rights and Corporate Governance Matters beginning on
page 149.
Regulatory
Approvals Required for the Merger
Applications or notifications may be filed with certain
regulatory authorities in connection with acquisitions or
changes in control of subsidiaries of FIS and FNF that may be
deemed to result from the merger, although no required approvals
have to date been identified. Although FIS and FNF do not
currently expect that any of the foregoing regulatory
authorities will raise any significant concerns in connection
with their review of the merger, there can be no assurance that
FIS and FNF will obtain all required regulatory approvals, or
that those approvals will not include terms, conditions or
restrictions that may have an adverse effect on FIS or FNF. As
discussed elsewhere in this proxy statement/prospectus, there
are a number of insurance regulatory approvals required for the
transactions contemplated by the distribution agreement;
although they have all been applied for, no assurance can be
given that they will all be obtained.
Other than the filings described above, neither FIS nor FNF is
aware of any regulatory approvals required to be obtained, or
waiting periods that must expire, to complete the merger. If
they discover that other approvals or waiting periods are
necessary, they will seek to comply with them. If any additional
approval or action is needed, however, FIS or FNF may not be
able to obtain it, as is the case with respect to other
necessary approvals. Even if FIS and FNF do obtain all necessary
approvals, conditions may be placed on any such approval that
could cause either FIS or FNF to abandon the merger.
Federal
Securities Laws Consequences; Resale Restrictions
All shares of FIS common stock that will be distributed to FNF
stockholders in the merger will be freely transferable, except
for restrictions applicable to affiliates of FNF or
FIS and except that resale restrictions may be imposed by
securities laws in
non-U.S. jurisdictions
insofar as subsequent trades are made within those
jurisdictions. Persons who are deemed to be affiliates of FNF or
FIS may resell shares of FIS common stock received by them only
in transactions permitted by the resale provisions of
Rule 145 of the rules and regulations promulgated under the
Securities Act or as otherwise permitted under the Securities
Act. Persons who may be deemed to be affiliates of FNF or FIS
generally include executive officers, directors and holders of
more than 10% of the outstanding shares of FNF or FIS. The
merger agreement requires FNF to use all reasonable efforts to
cause each of its directors and executive officers who FNF
believes may be deemed to be affiliates of FNF to execute a
written agreement to the effect that those persons will not
sell, assign or transfer any of the shares of FIS common stock
issued to them in the merger unless that sale, assignment or
transfer has been registered under the Securities Act, is in
conformity with Rule 145 or is otherwise exempt from the
registration requirements under the Securities Act.
This proxy statement/prospectus does not cover any resales of
the shares of FIS common stock to be received by FNF
stockholders in the merger, and no person is authorized to make
any use of this proxy statement/prospectus in connection with
any resale.
69
SUMMARY
OF MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS
The following is a summary of the material U.S. federal
income tax consequences of the spin-off and merger. This summary
is based on the U.S. Internal Revenue Code of 1986, as
amended, which we refer to as the Code, on the Treasury
Regulations promulgated thereunder, and on judicial and
administrative interpretations thereof, all as in effect on the
date of this summary and all of which are subject to change
(possibly on a retroactive basis).
This summary does not address all of the U.S. federal
income tax consequences that may be relevant to the particular
circumstances of an FNF stockholder or FIS shareholder, and it
does not address the effect of any foreign, state or local tax
law on a FNF stockholder or an FIS shareholder. In addition,
this summary does not address tax consequences for any holder
other than a U.S. Holder, as defined below. This summary
assumes that the FNF stock or FIS stock is held as a capital
asset.
For purposes of this summary, a United States Holder
is a holder of FIS stock or FNF stock that is (i) an
individual who is a citizen or resident of the United States;
(ii) a corporation or other entity taxable as a corporation
for United States federal income tax purposes created or
organized in the United States or under the laws of the United
States or of any state, (iii) an estate, the income of
which is subject to U.S. federal taxation regardless of its
source; or (iv) a trust, if a court within the United
States is able to exercise primary jurisdiction over its
administration and one or more U.S. persons have the
authority to control all of its substantial decisions. A
U.S. Holder does not include, and this summary does not
address the tax consequences to, certain persons subject to
special provisions of United States federal income tax law, such
as tax-exempt organizations, qualified retirement plans,
financial institutions, insurance companies, partnerships, real
estate investment trusts, regulated investment companies,
broker-dealers, persons who hold the FNF stock or FIS stock as
part of a straddle, a hedge, a constructive sale or a conversion
transaction, holders of FNF stock or FIS stock whose functional
currency is other than the United States dollar, persons who
acquired their shares of FIS stock or FNF stock through the
exercise of employee stock options or other compensation
arrangements, or pass-through entities and investors therein.
This summary is for general information purposes only and it
is not intended to be, and should not be construed to be, legal
or tax advice to any particular holder. Consequently, holders
are advised to consult their own tax advisors to determine the
application of U.S. federal income tax laws to their
particular situation, as well as any tax consequences arising
under the laws of any state, local or foreign taxing authority
or under any applicable treaty.
The spin-off is conditioned upon the receipt by FNF of a ruling
from the IRS and an opinion of Deloitte Tax LLP, special tax
advisor to FNF, together to the effect that the spin-off will be
tax free for both FNF and the stockholders of FNF under
Section 355 and related provisions of the Code. The merger
is conditioned upon FNFs receipt of a ruling from the IRS,
or FNFs obtaining an opinion from Deloitte Tax LLP and
FISs obtaining an opinion from Weil, Gotshal &
Manges LLP, special tax counsel to FIS, to the effect that the
merger will be treated as a tax-free reorganization within the
meaning of Section 368(a) of the Code. Although a private
letter ruling from the IRS generally is binding on the IRS, if
the factual representations or assumptions made in the letter
ruling are untrue or incomplete in any respect, then the ruling
may not be relied upon. Any opinions will be based on, among
other things, certain assumptions and representations as to
factual matters made by FNF, FNT and/or FIS, which, if incorrect
or inaccurate in any respect, could prevent those opinions from
being relied upon. Any opinions will not be binding on the IRS
or the courts, and the IRS or the courts may not agree with the
opinions.
U.S. Federal Income Tax Consequences of the
Spin-Off. FNF has requested an IRS ruling, and
expects that the IRS ruling and tax opinion on the spin-off
together will conclude the following with respect to the
spin-off: (i) no gain or loss will be recognized by (and no
amount will be included in the income of) FNF common
stockholders upon the receipt of shares of FNT common stock in
the spin-off except to the extent of any cash received in lieu
of a fractional share of FNT common stock; (ii) the
aggregate tax basis of the FNF common stock and the FNT common
stock (including any fractional share interest deemed to be
received and exchanged for cash) in the hands of each FNF common
stockholder after the spin-off will equal the aggregate tax
basis of the FNF common stock held by the stockholder
immediately before the spin-off, allocated between the FNF
common stock and the FNT common stock in proportion to the
relative fair market value of each on the date of the spin-off;
and (iii) the holding period of the FNT common stock
received by an FNF common stockholder will include the holding
period at the time of the spin-off of the FNF common stock on
which the distribution is made.
70
The spin-off would become taxable to FNF (and to its successor
after the merger, FIS) pursuant to Section 355(e) of the
Code if 50% or more of the shares of either FNF common stock
(taking into account FIS common stock, as successor to FNF
after the merger) or 50% or more of the FNT common stock were
acquired, directly or indirectly, as part of a plan or series of
related transactions that included the spin-off. Because the FNF
stockholders will own more than 50% of the FIS common stock
following the merger, the merger, standing alone, will not cause
the spin-off to be taxable to FNF under Section 355(e).
However, if the IRS successfully asserted that acquisitions of
FNF common stock or FIS common stock, either before or after the
spin-off, were part of a plan or series of related transactions
that include the spin-off, such determination likely would
result in the recognition of gain by FNF under
Section 355(e) taking into account that the merger will
result in an acquisition of approximately 49% of the stock of
FIS pursuant to a plan that includes the spin-off. In any such
case, the gain recognized by FNF would equal the fair market
value of all of the stock in FNT that FNF owns (including the
FNT common stock FNF receives for the asset contribution to FNT)
immediately prior to the spin-off minus FNFs basis in the
stock of FNT. FNF estimates the resulting tax on such gain to be
in the range of $150 million and possibly more depending on
the value of the FNT common stock at the time of the spin-off.
Under the agreements executed by the parties, FNT would
generally be required to indemnify FIS (as successor to FNF
after the merger) against tax-related losses to FIS that arise
if the spin-off were to become taxable under
Section 355(e). However, FIS would be required to indemnify
FNT if FIS had taken certain actions within its control that
caused the spin-off to be taxable. See The Merger
Agreement Other Covenants and Agreements
Tax Disaffiliation Agreement beginning on page 81. If
Section 355(e) were to cause the spin-off to be taxable to
FNF and indemnifiable by FNT or FIS, the spin-off would remain
tax-free to FNFs stockholders, assuming the other
requirements of Section 355 were otherwise satisfied.
As noted above, FNF stockholders will not be entitled to receive
any fractional shares of FNT common stock in the spin-off. FNF
stockholders otherwise entitled to receive fractional shares
will instead be entitled to receive cash in lieu of fractional
shares. An FNF stockholder generally will recognize capital gain
or loss on any cash received in lieu of a fractional share of
FNT common stock equal to the difference between the amount of
cash received and the tax basis allocated to such fractional
share. Such gain or loss will constitute long-term capital gain
or loss if the holding period in the FNF common stock
surrendered in the merger exceeds 12 months as of the date
of the merger. The deductibility of capital losses is limited.
Non-corporate holders of FNF common stock may be subject to
information reporting and backup withholding tax on any cash
payments received in lieu of a fractional share interest in FNT
common stock. Any such holder will not be subject to backup
withholding tax, however, if such holder furnishes or has
furnished a correct taxpayer identification number, and
certifies that such holder is not subject to backup withholding
tax, or is otherwise exempt from backup withholding tax. Any
amounts withheld under the backup withholding tax rules will be
allowed as a refund or credit against a holders United
States federal income tax liability, provided that the holder
furnishes the required information to the IRS.
U.S. Federal Income Tax Consequences of the
Merger. FNF has requested an IRS ruling, and
expects to receive a ruling from the IRS in connection with the
merger and that the ruling will conclude that: (i) FNF
common stockholders will not recognize gain or loss on the
exchange of their FNF common stock for shares of FIS common
stock pursuant to the merger, except to the extent of any cash
received in lieu of a fractional share of FIS common stock;
(ii) an FNF stockholders tax basis in the FIS common
stock received pursuant to the merger (including any fractional
share interest deemed to be received and exchanged for cash)
will equal the stockholders tax basis in the FNF common
stock (as adjusted as a result of the spin-off) surrendered in
exchange therefor; (iii) an FNF stockholders holding
period for the FIS common stock received pursuant to the merger
will include the holding period for the shares of FNF common
stock surrendered in exchange therefor; and (iv) neither
FNF nor FIS will recognize any gain or loss in the merger.
FNF stockholders will not be entitled to receive any fractional
shares of FIS common stock in the merger. FNF stockholders
otherwise entitled to receive fractional shares will instead be
entitled to receive cash in lieu of fractional shares. An FNF
stockholder generally will recognize capital gain or loss on any
cash received in lieu of a fractional share of FIS common stock
equal to the difference between the amount of cash received and
the tax basis allocated to such fractional share. Such gain or
loss will constitute long-term capital gain or loss if the
holding
71
period in the FNF common stock surrendered in the merger exceeds
12 months as of the date of the merger. The deductibility
of capital losses is limited.
Non-corporate holders of FNF common stock may be subject to
information reporting and backup withholding tax on any cash
payments received in lieu of a fractional share interest in FIS
common stock. Any such holder will not be subject to backup
withholding tax, however, if such holder furnishes or has
furnished a correct taxpayer identification number, and
certifies that such holder is not subject to backup withholding
tax, or is otherwise exempt from backup withholding tax. Any
amounts withheld under the backup withholding tax rules will be
allowed as a refund or credit against a holders United
States federal income tax liability, provided that the holder
furnishes the required information to the IRS.
72
THE
MERGER AGREEMENT
The following is a summary of certain material provisions of
the merger agreement, a copy of which is attached to this proxy
statement/prospectus as Annex A and is incorporated
into this proxy statement/prospectus by reference. This summary
is subject and qualified in its entirety by reference to the
merger agreement. We urge you to read carefully this entire
proxy statement/prospectus, including the annexes and the other
documents to which we have referred you.
The merger agreement, the distribution agreement and related
documents have been described in and included with this proxy
statement/prospectus to provide you with information regarding
their terms. They are not intended to provide any factual,
business, or operational information about FIS, FNF or FNT. Such
information can be found elsewhere in this proxy
statement/prospectus and in the other public filings FIS, FNF
and FNT make with the SEC, which are available without charge at
www.sec.gov. The merger agreement contains
representations and warranties FIS and FNF made to each other,
and the distribution agreement contains representations and
warranties FNT and FNF made to each other. These representations
and warranties were made as of specific dates and are subject to
qualifications and limitations agreed to by FIS and FNF in
connection with negotiating the terms of the merger agreement
and by FNT and FNF in connection with negotiating the terms of
the distribution agreement. Moreover, these representations and
warranties are subject to contractual standards of materiality
that may be different from those generally applicable to
disclosures to shareholders and in some cases these
representations and warranties may have been made solely for the
purpose of allocating risk between FIS and FNF (in the case of
the merger agreement) and between FNT and FNF (in the case of
the distribution agreement) and to provide contractual rights
and remedies to the parties rather than to establish matters as
facts. Accordingly, you should not rely on the representations
and warranties as characterizations of the actual state of
affairs.
Structure
of the Merger
The merger agreement provides for the merger of FNF with and
into FIS. Upon completion of the merger, the separate corporate
existence of FNF will cease and FIS will continue as the
surviving corporation.
Upon completion of the merger, we estimate that FNFs
former stockholders will own approximately 51.0% and FIS
shareholders will own approximately 49.0% of the then
outstanding shares of FIS common stock. FISs shareholders
(other than FNF) will continue to own their existing shares,
which will not be affected by the merger. Shares of FIS common
stock will continue to be listed on the NYSE under the trading
symbol FIS. Upon completion of the merger, FNF
common stock, which is listed on the NYSE under the trading
symbol FNF, will be delisted.
Consideration
to be Received in the Merger
Conversion of FNF Common Stock. At the
effective time of the merger, each issued and outstanding share
of FNF common stock will be converted into the right to receive
that number of shares of FIS common stock equal to 96,521,877,
divided by the aggregate number of shares of FNF common stock
issued and outstanding immediately prior to the effective time
of the merger. Alternatively, each issued and outstanding share
of FNF common stock may be converted into the right to receive
that number of shares of FIS common stock equal to 96,624,336,
divided by the aggregate number of shares of FNF common stock
issued and outstanding immediately prior to the effective time
of the merger under certain circumstances described below. We
refer to the number determined based on the foregoing
calculations as the conversion ratio.
The aggregate number of shares of FIS common stock that current
FNF stockholders will receive in connection with the merger
depends on the number of shares of FIS common stock issued to
FNF in connection with the Leasing merger. FNF Leasing currently
owns 75% of FNF Capital LLC, and based on that 75% ownership,
the number of shares of FIS common stock to be issued to FNF in
connection with the Leasing merger is 307,377. In such event,
the aggregate number of FIS shares to be issued to FNF
stockholders would be 96,521,877. If FNF Leasings
ownership of FNF Capital LLC increases to 100%, the number of
shares of FIS common stock to be issued to FNF in connection
with the Leasing merger would be 409,836. In such event, FNF
stockholders will have the right to receive an aggregate of
96,624,336 shares of FIS common stock.
Unless otherwise noted, the disclosures in this document assume
that FNF Leasing will continue to own only 75% of its subsidiary
FNF Capital LLC. However, approval of the issuance of shares
under the merger agreement will
73
constitute approval of the issuance of all shares that may be
issued, including any additional shares of FIS common stock that
would be issued if FNF Leasing increased its ownership of its
subsidiary FNF Capital LLC to 100%.
Fractional Shares. FIS will not issue
any fractional shares of FIS common stock in the merger. Any
holder of shares of FNF common stock entitled to receive a
fractional share of FIS common stock will be entitled to receive
a cash payment in lieu thereof, in an amount equal to the
holders proportionate interest in the net proceeds from
the sale or sales in the open market by the exchange agent, on
behalf of all such holders, of the shares of FIS common stock
constituting the excess of (i) the number of whole shares
of FIS common stock delivered to the exchange agent by FIS over
(ii) the aggregate number of whole shares of FIS common
stock to be distributed to holders of FNF common stock, referred
to as the excess shares. As soon as practicable following the
effective time of the merger, the exchange agent will determine
the number of excess shares and, as agent for the former holders
of FNF common stock, will sell the excess shares at the
prevailing prices on the NYSE. The exchange agent will deduct
from the proceeds of the sale of the excess shares all
commissions, withholding taxes, transfer taxes and other
out-of-pocket
transaction costs, including the expenses and compensation of
the exchange agent, incurred in connection with such sale of
excess shares.
Exchange
of Shares
On or promptly after the completion of the merger, Continental
Stock Transfer and Trust, FNFs exchange agent for purposes
of the merger, will mail a transmittal letter to FNF
stockholders, which transmittal letter will provide instructions
for use in effecting the surrender of FNF stock certificates in
exchange for FIS shares and, if applicable, cash in lieu of
fractional shares. No stock certificates should be sent to
either FNF or FIS.
Effect of
Merger on FNF Equity Awards
Prior to the merger, FNF stock options and shares of restricted
stock held by an FNT service provider will be replaced with FNT
stock options and shares of restricted stock pursuant to the
terms of the distribution agreement.
Stock
Options
At the time of the merger, FIS will assume FNF stock options
held by FIS service providers, with the same terms and
conditions as the FNF options, but with equitable adjustments
made to the exercise prices and the number of shares underlying
the options to preserve the intrinsic value of the FNF stock
options.
In addition, William P. Foley, II, Alan L. Stinson and
Brent B. Bickett entered into an agreement with FNF on
June 25, 2006, pursuant to which FNF has the right to cash
out a certain number of the FNF stock options held by
Messrs. Foley, Stinson and Bickett for their fair market
value as of the date FNF elects to exercise such right or cause
these individuals to exercise such options. To the extent FNF
exercises its right under this agreement, it is required to do
so immediately prior to the effective time of the spin-off under
the distribution agreement or as near thereto as practicable.
FNFs right to cash out these FNF stock options or cause
such options to be exercised is subject to the right of
Messrs. Foley, Stinson and Bickett to exercise such stock
options if doing so would not adversely affect the tax treatment
of the transactions contemplated by the distribution agreement.
With respect to the FNF stock options held by
Messrs. Foley, Stinson and Bickett that are not subject to
the agreement, and with respect to FNF stock options held by
other dual service providers, 50% of such options will be
assumed by FIS, as described above, and the remaining 50% of
such options will be replaced with FNT stock options pursuant to
the terms of the distribution agreement.
Restricted
Stock
Prior to the merger, all holders of FNF restricted stock will
receive FNT shares in connection with the spin-off in the same
proportion with respect to their restricted stock as other FNF
stockholders, with such shares subject to the same terms,
conditions and restrictions applicable to the corresponding FNF
restricted stock based upon continued service with FNT or FIS,
as the case may be.
At the time of the merger, the shares of FNF restricted stock
held by FIS service providers will be converted into shares of
FIS restricted stock based on the conversion ratio. This FIS
restricted stock will be subject to the same terms, conditions
and restrictions applicable to the corresponding FNF restricted
stock based upon continued service with FIS and its affiliates.
With respect to the dual service providers, 50% of their FNF
restricted stock will be replaced with FNT restricted stock and
50% will be converted into FIS restricted stock.
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FIS Stock
Options
FIS stock options held by an employee or director of FIS or FNF
who will be employed solely by or serve solely as a director of
FNT will fully vest as of the effective time of the
spin-off.
Holders
of FIS Common Stock
FIS shareholders will not be directly affected by the merger,
except that the percentage of total FIS common shares
outstanding owned by FIS shareholders immediately prior to the
consummation of the merger will be subject to dilution by FNF
options assumed by FIS in connection with the merger. As of
August 31, 2006, there were approximately 2.8 million
FNF options outstanding that were held by employees of FIS or
employees and directors of FNF that will become employees or
directors of FIS in connection with the merger. Any of these
options that remain outstanding as of the consummation of the
merger will be assumed by FIS and converted into FIS options
based on their intrinsic value as of the consummation of the
merger. Additionally, we anticipate that 1,410,000 FIS options
will be granted to certain executive officers and non-employee
FIS directors upon consummation of the merger.
If the consummation of the merger had occurred on
August 31, 2006, the number of FIS options that would have
been issued in replacement of outstanding FNF options would have
been approximately 3.1 million. Accordingly, if the merger
had occurred on August 31, 2006, the percentage of total
FIS common shares outstanding that would be owned by FIS
shareholders (other than FNF) immediately after the effective
time of the merger would be approximately 49.4% (i.e., assuming
all FNF options assumed by FIS and all FIS options anticipated
to be granted in connection with the merger were exercised),
instead of the approximately 49.5% currently owned by FIS
shareholders other than FNF (prior to giving effect to the
Leasing merger).
Employee
Benefit Plans
Prior to the spin-off, FNF will cause the sponsorship of all
FNF employee benefit plans, including the FNF 401(k) plan and
the FNF Employee Stock Purchase Plan, and its various health and
welfare plans, including all related insurance policies and
service agreements, to be transferred to FNT. FIS has agreed to
(i) provide coverage immediately following the
spin-off
under its health and welfare plans to employees of FNF and its
subsidiaries who will become employees of FIS, (ii) waive
any preexisting conditions or waiting periods under such plans,
and (iii) cause such plans to honor expenses incurred by
the employees and their beneficiaries for purposes of satisfying
deductibles and maximum
out-of-pocket
expenses. FIS will also cause any benefit plan in which
employees of FNF and its subsidiaries are eligible to
participate after the
spin-off to
take into account for purposes of eligibility, vesting, and
benefit accrual, service with FNF and its subsidiaries as if
such service were with FIS.
Representations
and Warranties
Each of FIS and FNF make representations and warranties about
themselves and their subsidiaries in the merger agreement. The
representations and warranties relate to, among other things:
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corporate organization and other similar matters;
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capital structure;
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authorization, execution, delivery, performance and
enforceability of the merger agreement and related matters;
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noncontravention of law and agreements and receipt of consents
and approvals from governmental entities and third parties with
respect to the merger agreement and related matters;
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documents filed with the SEC, the accuracy and sufficiency of
information contained in those documents, the conformity of
financial statements with applicable accounting principles and
the absence of undisclosed financial liabilities;
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absence of certain material changes or events and conduct of
business in the ordinary course since March 31, 2006;
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absence of material changes to any collective bargaining
agreements or benefit plans;
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matters relating to the Employee Retirement Income Security Act
of 1974 and employee benefit plans;
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filing of tax returns, payment of taxes and other tax matters;
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absence of excess parachute payments and disallowance of
deductions under Section 162(m) of the Internal Revenue
Code of 1986;
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shareholder approval of the relevant transactions;
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compliance with applicable laws and reporting requirements and
possession of all permits, licenses and regulatory or other
approvals required to conduct business;
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receipt of fairness opinions from financial advisors;
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brokers fees;
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recommendations from the respective boards of directors and
special committees of independent directors; and
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absence of material pending or threatened litigation.
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Significant portions of the representations and warranties of
the parties in the merger agreement are qualified as to
materiality or material adverse effect.
For purposes of the merger agreement, with respect to FNF,
material adverse effect means any material adverse
effect on the ability of FNF to perform its obligations under
the merger agreement, or to consummate the transactions
contemplated thereby, on a timely basis.
For purposes of the merger agreement, with respect to FIS,
material adverse effect means any change,
circumstance, effect, event or occurrence that (i) would be
materially adverse to the assets, liabilities, business,
financial condition or results of operations of FIS and its
subsidiaries taken as a whol