Temenos and Fidessa have today reached an agreement on the terms of a recommended all-cash acquisition by Temenos, through its wholly-owned subsidiary Temenos Holdings UK Limited.
The deal is to acquire the entire issued and to be issued ordinary share capital of Fidessa.
Fidessa and Temenos are two leading providers of software to banks and financial institutions, and the Transaction represents a compelling opportunity to create a global leader in financial services software. The combination of Temenos and Fidessa (the “Enlarged Group”) creates a group with the reach, stability and complementarity, across both product and geographies, to deliver greater value to its clients across their whole businesses.
Fidessa shareholders will be entitled to receive £35.67 in cash for each Fidessa share. In addition, Fidessa shareholders on the register of members of Fidessa as at close of business on 11 May 2018 or at close of business on the business day prior to the effective date of the Transaction (if earlier), will be entitled to receive and retain a final dividend and a special dividend in respect of the year ended 31 December 2017 together amounting to 79.7 pence in aggregate per Fidessa share. The price of £35.67 in cash for each Fidessa share represents a premium of approximately 36.9% to the closing price of £26.05 per Fidessa share on 16 February 2018.
The Transaction will be implemented by means of a Court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act 2006. The Transaction is subject to the satisfaction or waiver of certain conditions including the approval by Fidessa shareholders and the Court, receipt of certain anti-trust and regulatory clearances and other customary conditions. It is expected to complete in the first half of 2018.
The Transaction is expected to yield significant benefits through efficiencies and cross-selling opportunities. The Temenos board expects the Transaction to generate approximately $60 million per annum of run-rate pre-tax cost synergies, which are expected to be fully achieved within three years post completion. The EBITDA margin for the Enlarged Group is expected to increase from 32% to 37% pro forma for the run-rate cost synergies.
Management of Temenos expect the Transaction, on an adjusted earnings per share basis, to be earnings accretive for Temenos in 2018 and to lead to mid-teen accretion in the first full year following completion of the Transaction.
Commenting on today’s announcement, Andreas Andreades, the Executive Chairman of Temenos, said:
“I am delighted to have reached agreement on a recommended acquisition of Fidessa which will create a global leader across financial services software. We have long held Fidessa in high regard and we share a common goal of creating great software across both our segments and we are proud of our record of customer success and the exceptional client base we have built up amongst the global banks. We truly believe that this powerful combination will accelerate both companies complementary growth strategies in banking and capital markets and will enable us to cross-sell into our existing client bases and capture a greater share of the IT and software spend of banks especially as they move to the cloud.
The capital markets industry is undergoing structural changes that will require it to renew its software systems. However, the current vendor landscape is fragmented and dominated by legacy technology. This creates a huge opportunity to combine the complementary product strengths of Fidessa and Temenos in the front and back office to create a highly differentiated multi-asset class end-to-end platform for capital markets that will offer best in class costs and processing capabilities.
We are confident of being able to increase the revenue growth performance of Fidessa’s business over time by taking the following steps: implementing Temenos’ sales focused model; broadening Fidessa’s product offering to cover software solutions from the front to the back office, in line with Temenos’ offering in core banking; continuing Fidessa’s management’s strategy of investing in the provision of software solutions across capital markets; and, through revenue synergies arising from significant cross-selling opportunities. These are truly exciting times in our industry as we embark on a period of wholesale IT modernization. We are convinced that our combined company will have a unique set of capabilities that when combined with our exceptional people will position us as a core strategic partner to large financial institutions globally looking to upgrade their systems for the digital age.”