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Fidelity National Information Services to Buy Software Maker SunGard

Fidelity National Information Services, a large service provider for banks, said on Wednesday that it had agreed to buy SunGard in a cash-and-stock deal that values the financial software company at about $9.1 billion, including debt.

The SunGard acquisition is expected to complement Fidelity National Information Services’ business of providing banking and payment technology services to the financial services industry. SunGard, also a financial services information technology and software provider, is based in Wayne, Pa. It posted annual revenue of $2.8 billion in 2014 and has more than 13,000 employees. The combined company would have more than $9.2 billion in annual revenue and more than 55,000 employees, Fidelity National Information Services said.

At first glance, the sale might appear to be a disappointment to the private equity firms that paid about $11 billion for SunGard in 2005.

But a closer look at the deal reveals that those private equity investors can claim a modest return for their efforts.

How big a return will those firms realize? Just over 1.5 times their equity investments, according to people briefed on the matter who spoke on the condition of anonymity because the returns were confidential, and most likely about 1.6 times.

Some of these people estimated that the final return could be closer to two times their equity investment, though another person dismissed that as too high. The actual equity that the firms put in was less than the $11 billion figure, which included debt.

That is not a miss by any means. But it is far from a home run for an investment made a decade ago, at the beginning of a leveraged-buyout boom that halted with the onset of the debt market decline in fall 2007.

Seven firms — Bain Capital, the Blackstone Group, the private equity division of Goldman Sachs, Kohlberg Kravis Roberts & Company, Providence Equity Partners, Silver Lake and the Texas Pacific Group (now TPG Capital) — teamed up to buy SunGard, paying a 44 percent premium for the company, whose products are used by banks and other financial institutions.

Yet those firms had to hold on to the company for almost 10 years, even as they were able to sell other investments in a much shorter period of time, and for much better returns.

The private equity investors were able to use a number of corporate finance tactics to bolster their returns on the SunGard deal. They took out about $700 million in dividends from the company, for instance.

And they broke SunGard into parts, both to raise money and to make the resulting operation more digestible to potential buyers. They sold the bulk of SunGard’s higher-education business to Datatel for about $1.8 billion, creating a new company now known as Ellucian.

They spun off SunGard’s disaster recovery operations into a separate unit that they still hold. (That small business is not expected to generate a meaningful return when it is sold, some of the people briefed on the matter said.)

What was left, and what is being sold to Fidelity National Information Services, is the financial software business and a tiny portion of the education operations. All told, that accounts for just over 50 percent of the revenue that the old SunGard collected when it was acquired in 2005.

As for what Fidelity National Information Services is paying to SunGard’s owners, the breakdown amounts to:

■ $2.8 billion worth of stock.

■ $2.3 billion in cash.

■ The assumption of SunGard’s $4 billion in debt.

Of course, the ultimate return that the private equity consortium will reap will depend in part on the price at which those firms can sell their shares in Fidelity National Information Services. So far, investors in that company appear pleased by the transaction, having pushed up its shares more than 8 percent on Wednesday.

The transaction is subject to regulatory approval and is expected to close in the fourth quarter.

News that the companies were in talks emerged in July.

“We are proud to become part of one of the financial services industry’s most respected and solidly performing companies,” Russell P. Fradin, the president and chief executive of SunGard, said in a news release. “We embrace this transaction and believe it is the best outcome for our employees and the clients we are dedicated to serving.”

Gary Norcross, the president and chief executive of Fidelity National Information Services, called the deal “a significant milestone” for his company.

Bank of America Merrill Lynch, Centerview Partners and the law firm Willkie Farr & Gallagher advised Fidelity National Information Services, while Goldman Sachs, JPMorgan Chase, Barclays, Deutsche Bank, Credit Suisse and the law firms Simpson Thacher & Bartlett and Shearman & Sterling advised SunGard.

A version of this article appears in print on  , Section B, Page 5 of the New York edition with the headline: SunGard, Financial Software Maker, Is Bought for $9 Billion . Order Reprints | Today’s Paper | Subscribe

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