By any calculation, the sale of Misys’s majority stake in Allscripts is a fabulous return for two years’ work.
Misys bought the 54.5 per cent stake in the US healthcare software business in 2008 for $330m plus the value of its own ailing healthcare software operations – estimated to be worth about $100m – which were folded into the combined entity.
Today it expects to sell most of this stake for $1.3bn in cash, as Allscripts merges with Eclipsys to create one of the largest US healthcare software operations. At the very least, the UK software company has doubled its money, and shareholders could be in line to receive about $1.2bn in cash through a share buy-back this autumn – about 72 per cent of Misys’s market value.
It is the kind of hedge fund-style return that ValueAct Capital, Misys’s biggest shareholder with 29 per cent, had in mind in 2006 when Mike Lawrie, one of its former partners, took over as chief executive and began to turn round a sleepy and struggling British technology company.
Before Mr Lawrie can ride off in glory, however, he must settle what will happen to the other half of Misys’s operations, its stagnant financial software business.
This year, he appointed Al-Noor Ramji, the former chief information officer of BT, to an executive role at the banking division and on Wednesday brought in a new chief financial officer for the company.
Mr Lawrie would not rule out acquisitions as a way of helping the banking business grow faster.
“It is all guns blazing,” Mr Lawrie said. “The last stage of this turnround is to create a leader in the financial services software sector.”
The Allscripts healthcare business is being boosted by huge US stimulus spending on upgrading electronic patient records, but the Misys banking arm has had no such fairy godmother to bolster business.
Founded in 1979, Misys provides core software for some 1,200 financial institutions around the world. It is a stable and established business, banks being slow to change vital computer systems. However, the software has become badly outdated and Misys is losing new business to peers such as Temenos, Oracle and Infosys. The latest financial report from Misys, for the quarter to the end of February, showed a 12 per cent fall in banking revenues.
In March Misys launched a software platform, BankFusion, which it hopes will return the business to growth. Mr Lawrie has said he wants to have 250 banks using BankFusion within five years, bringing in £250m in incremental revenue.
If this works, the banking business should see a rise in its market value. Analysts value it at about 10 times projected earnings for 2010, compared with about 17 times for its competitors.
The Misys banking division could become a takeover target for competitors looking to buy the impressive Misys customer list. Temenos, for example, has looked at buying the banking operations in the past, and Oracle could be looking to increase its banking software capabilities, following the purchase of a large stake in i-Flex, the Indian banking software company, five years ago.