CORRECT: Fundtech Agrees To S1 Merger In Deal That Values Co At $318 Million
28 Giugno 2011 - 1:06AM
Dow Jones News
NEW YORK (DOW JONES)--S1 Corp. (SONE) and Fundtech Ltd. (FNDT)
agreed to combine their businesses through a stock-for-stock merger
that values Fundtech at $318 million, a deal that should expand the
software companies' product offerings and geographic footprint.
The deal values Fundtech--which licenses software products to
banks--at $20.51 a share, a 4.7% premium to Friday's closing price.
The premium is 18% when considering the stock's value before
Fundtech confirmed earlier this month it was in preliminary talks
with suitors that had expressed interest in a merger or
acquisition.
Fundtech and other vendors that offer software products to banks
have benefited from the growing volume of banking payments, which
has led big banks to reevaluate legacy systems and seek out firms
that can help them better process those payments. Last month,
Fundtech reported its first-quarter profit jumped sharply on
across-the-board revenue increases from software, maintenance and
services.
Fundtech Chief Executive Reuven BenMenachem told Dow Jones
Newswires that the combination would allow the companies to cover
more space serving the globe's transaction banking market, as
Fundtech has been more focused on corporate banking while S1 has
addressed the retail market.
George Ravich, Fundtech's chief marketing officer, said
transaction banking is a $650 billion industry worldwide and makes
up about one-third of a bank's revenue. He said banks have invested
heavily in the space, adding that the merger would allow Fundtech
and S1 to offer more products to both small community and global
giants.
D.A. Davidson analyst John Kraft said the merger would make it
easier for the firms to sell their software products to big banks,
as the deal would bolster their offerings to customers that include
Bank of America Corp. (BAC) and Capital One Financial Corp.
(COF).
Kraft added that S1's strengths include debit-card payments and
the front-end aspects of cash management, which include user
interface and experience, while Fundtech's product offerings are
focused more on wholesale corporate payments and the mechanics, or
backend, of cash management.
The deal will also bolster the combined company's global
presence. Kraft said Fundtech is strong in India and Western
Europe, while S1 is well positioned in Latin America and
Africa.
While Kraft said the deal is expected to add to earnings by
expanding the product portfolio and enhancing the company's global
presence, he said the price wasn't particularly high, which would
allow room for someone to offer more for Fundtech.
Kraft said there is likely going to be more consolidation within
the financial-technology space, saying banks prefer to work with
fewer vendors. He speculated that some bigger full-suite vendors
that are likely to buy up niche players included Fiserv Inc. (FISV)
and Fidelity National Information Services Inc. (FIS). Some
targets, according to Kraft, include bill-pay vendor Online
Resources Corp. (ORCC) and S1 itself, which has long been talked
about as a potential takeover target.
Under terms of the deal, Fundtech shareholders will receive 2.72
shares of S1 common stock for each Fundtech ordinary share they
own. Upon closing of the merger, S1 shareholders will own about 55%
of the company, while Fundtech's holders will own the rest. The
combined company will be called Fundtech and led by BenMenachem as
chairman and Johann Dreyer, who will serve as chief executive.
The deal, which is seen adding to S1's 2012 adjusted earnings,
is expected to close in the fourth quarter. It is subject to
approval by shareholders at both companies, as well as various
regulatory approvals.
Fundtech's shares closed Monday down 0.2% to $19.54, while S1's
fell 3.7% to $7.26. Fundtech's shares traded just above $10 in July
2010, and have been steadily rising the past year.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com
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