Fifth Third Bancorp expects an after-tax gain of $650 million from its repurchase agreement with fintech company Vantiv Inc. and unit Vantiv Holding LLC.
The Cincinnati-based bank also expects to repurchase its own shares using the gain, in line with its 2017 capital plan.
Under the agreement, Fifth Third will exercise its right to exchange its 19,790,000 class B Vantiv Holding units for the same number of Vantiv class A shares. Vantiv will then repurchase the shares at $64.04 apiece and will cancel them, leaving Fifth Third with beneficial ownership of approximately 8.6% in the payments firm. As a result, Fifth Third will no longer be entitled to name a director to Vantiv's board and the bank's current appointee will step down.
The repurchase is conditioned on Vantiv's publishing of a firm offer to buy Worldpay Group plc. If the offer is not made by Aug. 31, the Vantiv-Fifth Third agreement is subject to termination.
If Vantiv acquires Worldpay, Fifth Third's beneficial stake in Vantiv will be 4.9%.
Vantiv expects to record an approximately $650 million liability for the quarter ending Sept. 30 in connection with the buyback. This will have no impact on its statements of income.