Fundtech shifts gears, opts for GTCR over S1 bid
by Mary Kathleen Flynn | Published September 15, 2011 at 1:13 PM ET
Fundtech Ltd., a provider of transaction banking software and services to financial institutions, determined Thursday that a proposal from private equity firm GTCR LLC to acquire it for $388 million in cash and combine it with GTCR portfolio company BankServ constitutes a "superior offer" to its previously announced merger with S1 Corp.
Clal Industries and Investments Ltd., which controls 58% of Fundtech shares, said it has accepted the offer.
The move may make it more likely that S1 will ultimately accept a hostile takeover from ACI Worldwide Inc. The land grab for companies that provide electronic services to banks underscores the increased pressure on banks and retailers to handle the growing volume of payments more efficiently.
"Fundtech is a premier financial technology franchise, and combining these two complementary companies would create an industry leader in the growing market for innovative banking technologies and electronic corporate payments," said Collin Roche, principal of GTCR, which is based in Chicago.
Fundtech, which has offices in Jersey City, N.J., and Herzliya, Israel, gave S1 notice that it will recommend GTCR's new proposal to pay $23.33 per Fundtech ordinary share.
It plans to terminate the S1 merger agreement and sign a definitive deal with GTCR, acknowledging that the terms of the S1 pact gives S1 the right to propose within five business days changes to its own proposal.
The GTCR proposal anticipated that Fundtech's largest shareholder, Clal Industries, would vote in favor of the transaction. GTCR expects to close the transaction in the fourth quarter.
The combined company, Fundtech Inc., would have its headquarters at Fundtech's U.S. headquarters in Jersey City. Fundtech founder Reuven Ben Menachem would continue in his role as CEO. David Kvederis, founder and CEO of BankServ, would support the integration of BankServ and Fundtech as a member of Fundtech Inc.'s board.
GTCR's proposed investment in Fundtech will be made from GTCR Fund X, a private equity fund raised in 2011 with $3.25 billion of committed capital.
S1, based in Norcross, Ga., is "currently reviewing its options," which include making a counteroffer for Fundtech, finding another partner, accepting an offer from ACI or trying to go it alone.
The summer began well enough for S1, when on June 27, after weeks of rumors, S1 agreed to buy Fundtech for stock valued at $325 million in a tax-free swap.
Almost one month later, however, on July 26, New York-based ACI, which provides electronic payment systems to banks, acted as spoiler, announcing an unsolicited bid to acquire S1 for $9.50 per share in a cash-and-stock transaction valued at roughly $540 million. ACI argued that its bid was superior to S1's merger with Fundtech.
Following the filing of the definitive proxy for S1's merger with Fundtech, ACI raised its hostile offer for S1 to $575 million. Then on Aug. 30, ACI launched an exchange offer to acquire S1. Under the terms of the offer, S1 stockholders would receive $6.20 in cash and 0.1064 ACI shares for each S1 share. That valued S1 at $9.44 per share based on ACI's Aug. 29 stock price.
On Tuesday, S1 announced that its board had determined that the exchange offer "is not in the best interests of S1 or its stockholders" and recommended stockholders reject it. Skadden, Arps, Slate, Meagher & Flom LLP and Herzog Fox & Neeman served as legal counsel to GTCR. Moelis & Co., RBC Capital Markets and BMO Capital Markets Corp. served as financial advisers to GTCR. Royal Bank of Canada, BMO Capital Markets and Newstone Capital Partners LLC provided debt financing in connection with the proposed transaction.
Kirkland & Ellis LLP is representing Fundtech in its possible sale to GTCR, with partners David Fox and William Sorabella and associate Dvir Oren leading the team. Kramer Levin Naftalis & Frankel LLP and Meitar Liquornik Geva & Leshem Brandwein are legal counsel. Citigroup Inc. is financial adviser to Fundtech.
A Wells Fargo Securities LLC team that includes John Laughlin, Jim Broner, Tom Wilson and David Evans is serving as financial adviser to ACI, and Jones Day is its legal adviser, led by partner Bob Profusek and including partners Marilyn Sonnie, Craig Waldman, Tom Smith, Candace Ridgway and Mark Hanson.
Raymond James & Associates Inc. is financial adviser to S1 in its bid for Fundtech, along with a Hogan Lovells US LLP team led by Daniel Keating and including Stuart Stein, global co-head of the corporate practice group; partners Christian Chandler, Scott McClure and Joseph Krauss; and associates Kyle McNamara, Nathaniel DeRose, Christian Ulrich and Jason McCaffrey. Zellermayer Pelossof Rosovsky Tsafrir Toledano & Co. is legal counsel.
Clal Industries and Investments Ltd., which controls 58% of Fundtech shares, said it has accepted the offer.
The move may make it more likely that S1 will ultimately accept a hostile takeover from ACI Worldwide Inc. The land grab for companies that provide electronic services to banks underscores the increased pressure on banks and retailers to handle the growing volume of payments more efficiently.
"Fundtech is a premier financial technology franchise, and combining these two complementary companies would create an industry leader in the growing market for innovative banking technologies and electronic corporate payments," said Collin Roche, principal of GTCR, which is based in Chicago.
Fundtech, which has offices in Jersey City, N.J., and Herzliya, Israel, gave S1 notice that it will recommend GTCR's new proposal to pay $23.33 per Fundtech ordinary share.
It plans to terminate the S1 merger agreement and sign a definitive deal with GTCR, acknowledging that the terms of the S1 pact gives S1 the right to propose within five business days changes to its own proposal.
The GTCR proposal anticipated that Fundtech's largest shareholder, Clal Industries, would vote in favor of the transaction. GTCR expects to close the transaction in the fourth quarter.
The combined company, Fundtech Inc., would have its headquarters at Fundtech's U.S. headquarters in Jersey City. Fundtech founder Reuven Ben Menachem would continue in his role as CEO. David Kvederis, founder and CEO of BankServ, would support the integration of BankServ and Fundtech as a member of Fundtech Inc.'s board.
GTCR's proposed investment in Fundtech will be made from GTCR Fund X, a private equity fund raised in 2011 with $3.25 billion of committed capital.
S1, based in Norcross, Ga., is "currently reviewing its options," which include making a counteroffer for Fundtech, finding another partner, accepting an offer from ACI or trying to go it alone.
The summer began well enough for S1, when on June 27, after weeks of rumors, S1 agreed to buy Fundtech for stock valued at $325 million in a tax-free swap.
Almost one month later, however, on July 26, New York-based ACI, which provides electronic payment systems to banks, acted as spoiler, announcing an unsolicited bid to acquire S1 for $9.50 per share in a cash-and-stock transaction valued at roughly $540 million. ACI argued that its bid was superior to S1's merger with Fundtech.
Following the filing of the definitive proxy for S1's merger with Fundtech, ACI raised its hostile offer for S1 to $575 million. Then on Aug. 30, ACI launched an exchange offer to acquire S1. Under the terms of the offer, S1 stockholders would receive $6.20 in cash and 0.1064 ACI shares for each S1 share. That valued S1 at $9.44 per share based on ACI's Aug. 29 stock price.
On Tuesday, S1 announced that its board had determined that the exchange offer "is not in the best interests of S1 or its stockholders" and recommended stockholders reject it. Skadden, Arps, Slate, Meagher & Flom LLP and Herzog Fox & Neeman served as legal counsel to GTCR. Moelis & Co., RBC Capital Markets and BMO Capital Markets Corp. served as financial advisers to GTCR. Royal Bank of Canada, BMO Capital Markets and Newstone Capital Partners LLC provided debt financing in connection with the proposed transaction.
Kirkland & Ellis LLP is representing Fundtech in its possible sale to GTCR, with partners David Fox and William Sorabella and associate Dvir Oren leading the team. Kramer Levin Naftalis & Frankel LLP and Meitar Liquornik Geva & Leshem Brandwein are legal counsel. Citigroup Inc. is financial adviser to Fundtech.
A Wells Fargo Securities LLC team that includes John Laughlin, Jim Broner, Tom Wilson and David Evans is serving as financial adviser to ACI, and Jones Day is its legal adviser, led by partner Bob Profusek and including partners Marilyn Sonnie, Craig Waldman, Tom Smith, Candace Ridgway and Mark Hanson.
Raymond James & Associates Inc. is financial adviser to S1 in its bid for Fundtech, along with a Hogan Lovells US LLP team led by Daniel Keating and including Stuart Stein, global co-head of the corporate practice group; partners Christian Chandler, Scott McClure and Joseph Krauss; and associates Kyle McNamara, Nathaniel DeRose, Christian Ulrich and Jason McCaffrey. Zellermayer Pelossof Rosovsky Tsafrir Toledano & Co. is legal counsel.