FI Tech: Things are getting bloody in ACI / S1 / Fundtech battle
A riddle: if ACI Worldwide wants to buy S1 Corpration and S1 Corp wants to by Fundtech and Fundtech wants to be bought by S1 but ACI does not want to buy Fundtech, who will buy who?
Rarely has there been anything as interesting in the financial technology sector as the battle for control of S1, a major player in payments, on-line banking and branch banking software with a history going back more than two decades.
Fundtech is even older - formed in 1993. It specialises in banking software that complements much of the S1 portfolio including cash management, electronic invoicing and several other areas.
ACI provides the kind of services that both S1 and Fundtech deliver but there is a greater fit with S1, ACI feels.
ACI has every reason to be concerned: a combined Fundtech/S1 would be able to provide a portfolio that broadly matches ACI's - and to cross-sell to their combined user bases.
In short, two relatively small competitors would become, as a result of an S1 takeover of Fundtech (mistakenly being promoted as a "merger") a single, formidable competitor.
S1 plus Fundtech would be mean a significantly higher price tag than ACI wants to (perhaps could) pay for S1 alone. ACI has made an offer - S1's response was to announce the takeover of Fundtech. ACI has increased the offer and written directly to S1 shareholders urging them to reject the S1 proposal to take over Fundtech.
In a (too?) forcefully written letter to S1 shareholders, ACI says that its new offer is some 30% above the current share price of S1. Also, it is a mostly cash offer - some ACI shares are included in the offer but only large shareholders will see any significant benefit from that, suggesting that it may be a sweetener. All sharehollders, the letter repeatedly shrieks, should vote against the takeover on the proxy card.
There is no suggestion that S1's proposed purchase of Fundtech is a poison pill. But the timing is interesting. Regulatory approval is not likely to be forthcoming until after the time has run out on the ACI offer, which would mean that S1 has a built-in back door to escape from ACI.
The fight is not going away any time soon.
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