Misys and Temenos agree key merger terms

Misys and Temenos have reached agreement on the key terms of a proposed £2bn merger that would create the world’s largest supplier of risk-management computer software to banks.

The planned merger, one of the biggest between European technology companies, would see Misys shareholders take 53.9 per cent of the combined group and Temenos shareholders 46.1 per cent.

The combined group would have about 1,000 banks as customers, making it about four times larger than its closest competitors, the financial services arms of Infosys, TCS and Oracle.

Guy Dubois, currently chief executive of Temenos, would hold the same role at the combined group, while Stephen Wilson, the chief financial officer of Misys, would become CFO of the merged company.

The combined company would have its headquarters in Switzerland but be listed on the London Stock Exchange, with a potential secondary listing in Switzerland.

Andreas Andreades, chairman of Temenos, would become chairman of the combined group. Misys would choose five out of nine board members while Temenos would pick four.

Mike Lawrie, chief executive of Misys, will leave the company. His departure was widely expected, given that, during the five years Mr Lawrie has been working to turn around the Misys business, he had never made the UK his permanent home during that time.

Value Act, the largest shareholder in Misys, has sad it is strongly supportive of the proposed merger.

Misys is closely held by a small group of shareholders, including Schroders Investment Management, Threadneedle and Fidelity. Standard Life is one of the ten largest shareholders in both companies.

With no period of exclusivity, some industry analysts still expect a counterbid to emerge for Misys, possibly from Fidelity National Information Services, which had failed takeover talks with the company last summer.

Analysts said it remained to be seen whether Temenos shareholders would want to swap their stock for shares in the combined group, given that Misys shares have gained nearly a third in value over the past month on the back of bid rumours.

Misys shares fell 2.6 per cent to 326.10p ahead of the announcement by the companies after the close of trading in London. It was valued at £1.12bn at the closing price. Shares in Temenos rose 0.56 per cent to SFr19.25, giving it a market capitalisation of SFr1.38bn.

Misys and Temenos are expecting costs savings from combining their back office and research and development functions, although people close to the company said that the two companies’ flagship core banking software systems – BankFusion and T24 – will both be maintained.

The companies are under pressure to agree a deal quickly, not just to prevent the emergence of a rival offer, but because of concerns that customers will delay orders while there is uncertainty over the future of the two companies.

Temenos has rapidly grown its share of the market for core banking software during the last few years, but experienced a sharp drop in spending last year as banks pulled back on new projects. Misys has had slower growth in the past few years but has withstood the downturn better thanks to repeat revenues from a long-established customer base.

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