David Arnott, CEO of Temenos

Temenos has agreed to buy UK trading platform firm Fidessa in a deal which values the latter at £1.4 billion ($1.95 billion). The deal arrives on the back of swirling rumours about Temenos itself being acquired by a larger company.

Temenos released a statement earlier this week that it had proposed an all-cash offer worth $36.46 per share to Fidessa. Shares in the UK firm rocketed following the news, rising by more than a fifth to an all-time high of £36.

Conversely, Temenos shares fell by 6.5%, amid analyst worries that the deal would slow down the core banking vendor’s growth. There were fears that the offer would kick off a bidding war, yet Fidessa put the proposal to its shareholders, who approved the deal. By the time of the acceptance, Fidessa shares had risen by 42% over the course of three days.

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Fidessa had announced its annual revenues earlier in February, revealing a 7% rise in revenue to £354 million ($491.89 million).

In November, Temenos spent $160 million in a buyback worth CHF122 ($130) per share. At the time of Fidessa deal closing, its shares were around CHF115 ($122). According to Bloomberg analysts, the return on invested capital for the Swiss firm appears to sit at around 6% by 2020.

Temenos is focusing on the strategic logic of deal, which it claims will bolster its service and software offerings to banks. The board expects a $60 million per annum run-rate in three years. It also expects the enlarged group to have revenues of more than $1.2 billion and an EBITDA margin of 32.3%.

“The capital markets industry is undergoing structural changes that will require it to renew its software systems,” said David Arnott, in an email about the deal.

Related: Temenos wins Tier 1 deal in the US

“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 end-to-end platform for Capital Markets that will offer best in class costs and processing capabilities.”

The deal is expected to close in Q2 2018, following regulatory approval.

Temenos has an acquisitive history, with no fewer than 12 buyups since 2007. Rumours flew earlier in the month that the software firm was itself the subject of an acquisition, which were quickly denied when contacted by IBSI.

by Alex Hamilton
Alex is Senior Reporter at IBS Intelligence, follow him on Twitter or contact him at: alexanderh@ibsintelligence.com
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