Misys/Temenos merger fails to impress

Shareholders in Misys and Temenos have been left unimpressed by the terms of a proposed $2bn merger between the two companies, which would create the world’s largest provider of banking software.

The deal would see Temenos shareholders take 46.1 per cent of the new company, while Misys would have 53.9 per cent. As a sweetener, Temenos management will take the key roles at the new company, with Guy Dubois becoming chief executive and Andreas Andreades becoming chairman of the enlarged group.

Analysts said the division of shares did not reflect the long-term value of Temenos, which is seen as having better software and was growing faster than Misys until the recent economic uncertainties hit its business. Temenos, which issued a profits warning last July, has seen its shares halve in value over the past year, while Misys shares are down by just a quarter.

Hopes of a rival bid are receding, however, especially after it emerged that Mike Lawrie, chief executive of Misys, is leaving to head up Computer Sciences Corporation, the troubled IT services company.

CSC, which recently announced a $1.5bn writedown on a disputed contract with the UK’s National Health Service, saw its biggest share price rise in three decades following the announcement. However, Mr Lawrie’s departure leaves Misys’s future more precarious unless the Temenos deal goes through.

A combined Temenos and Misys would have about 1,000 banks as customers and would be better placed to weather the downturn in bank spending. Approximately $100m in annual savings could be made from cutting staff and closing offices.

However, analysts are concerned that putting together two rival software systems would be messy and cause confusion for customers.

Shares in Temenos remained largely flat over the past week, while shares in Misys lost 10 per cent in value.

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