Once in play, always in play. Misys shares lurch from one bout of bid speculation to the next. When the UK banking software group failed to secure an all-cash takeover by Fidelity National Information Services last year, they tumbled. Yet they are up 38 per cent since the beginning of the year – and not just for fun. Misys said on Friday that it was in preliminary merger talks with Geneva-based Temenos, its biggest rival. A deal – the combined companies have a market capitalisation of about $2.8bn – would be unlikely to create much value. Investors should hope for a bidding battle.
Mike Lawrie, chief executive, has always looked as if he was turning around Misys to sell it (he used to work at ValueAct Capital Partners, the activist investor that owns a fifth of the software group). His turnround is working well enough – the 2010 purchase of Sophis, a risk-management software specialist, gave Misys greater heft. But FNIS walked away because the US group was loath to overpay in a downturn – banks have been slow to commit to software projects.
Investors pushed up Temenos’s share price by 20 per cent on Friday; Misys was flat. That suggests that the premium is already in the latter’s share price (it is the larger of the two companies). There is some overlap between the two, giving scope for cost synergies. But with Temenos strongest in wealth management and Misys in capital markets, synergies may be limited.
The more enticing aspect of the talks is that they could flush out an interloper. FNIS offered cash for Misys, valuing it at about a third more than Friday’s £1bn. The US group could return to the fray, while India’s Infosys and Tata have been mentioned in dispatches. An all-share merger with struggling Temenos is hardly the exit Mr Lawrie should want. Let the play begin.
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