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The payments technology firm Fundtech can still expand but spend more on R&D and invest for the long term, an executive explains.
September 19
It appears increasingly likely that S1 Corp. will merge with ACI Worldwide Inc. — despite S1's
And if it doesn't, the rapidly consolidating commercial payments industry may force it to form another alliance soon.
That's the view of those who been closely watching the push-me-pull-you action unfold among S1, Fundtech Ltd. and ACI since June.
They are three of the biggest players in the payments industry, which is critically important to banks, because it is the lifeblood of their commercial clients, who need to keep on top of the increasingly complex ways that cash is moved and deposited globally.
"However this deal ends up, it will be important to the banks because these are three of the primary vendors of online banking systems for the commercial sector," says Steve Ledford, a partner at Novantas LLC of New York.
In mid-September, Fundtech
GTCR plans to merge Fundtech with the software provider BankServ, of Las Vegas. The deal is valued at more than $400 million.
ACI's competing offer to buy S1 may now look especially sweet to S1's shareholders.
"The main difference is that ACIW is less likely to raise its offer significantly," Gil Luria, a senior vice president at Wedbush Securities LLC., in Los Angeles, wrote in an email.
In late August, ACI made a
(S1 shares fell 17 cents, to $8.79, on a rough day for the markets Wednesday.)
With the stock market lurching in and out of loss territory for the year, there may be
S1 did not make anyone available to comment.
ACI provides back-end payment processing and funds sourcing and trade software to more than 800 financial institutions, processors and retailers globally.
S1 specializes in front-end corporate, small business, and retail online and mobile banking products, but it has also developed products and services in the trade finance category.
Banks are seeking to replace or update their commercial banking systems with Internet-based offerings and so-called Web 2.0 functionality, experts say.
"We are seeing a generational change in these systems," Ledford says.
If S1 does not merge with ACI, it still has other options. Analysts say that a core provider such as Fiserv Inc., of Brookfield, Wis., or Fidelity National Information Services Inc., of Jacksonville, Fla., while not currently invested in the corporate treasury market, might see a merger with S1 as beneficial down the road.
Other combinations might include IT2 Treasury Solutions Ltd., Kyriba Corp., Chesapeake System Solutions Inc. and Calypso Technology, Enrico Camerinelli, a senior analyst for Aite Group LLC, wrote in an email.
The biggest issue is that none of these companies has expressed a desire to merge, acquire or be acquired, Camerinelli says.
Meanwhile, the most significant roadblock to a deal with ACI is the acrimony with which S1's board has met ACI's unsolicited offers.
"The S1 board has been so vocal in rejecting any form of a deal with ACI that I now find it difficult to believe that they [would] turn 180 degrees and welcome the offer," Camerinelli says.
By acquiring S1, ACI would remove a competitor from the market. It would also create uncertainty whether S1's products and services would survive, as well whether its executive team would remain.
"From S1's perspective, this not how they want it to end, but the shareholders will have a different view," Aaron McPherson, practice director for IDC Financial Insights, says.
S1's board may thus have to swallow a bitter pill.
"The most desirable outcome for everyone involved — customers and shareholders alike — would be a mutually negotiated agreement," Luria wrote.
