Technology provider Open Solutions Inc. has signed a definitive agreement with two equity firms-the Carlyle Group, LLC, and Equity Partners-taking the publicly-traded company private once again in a bid to fund OSI's continued growth.
The two equity firms have agreed to pay $930 million-or about $38 a share-in a transaction the three firms hope to consummate in the first quarter. The deal must be approved by the SEC, as well as OSI shareholders.
Established in 1992 as a private entity, OSI went public in November 2003 at a price of about $17 per share. "When OSI was founded in 1992, we developed our system from scratch, and the founders put in their own money and then went to venture capitalists to raise the rest," said OSI's Mickey Goldwasser. "When we went public, it was essentially an exit strategy for the original investors."
By May 2004, the stock was priced at $21.50. This past March, the company took on some debt to acquire a unit of Bisys, and it was time to start looking at how to fund OSI's continued growth.
"This is just a change in our capital structure. If you came to our offices today, you would see that it is business as usual. There's been no change in our management," Goldwasser explained. "What this does is it allows us to focus more long term and increase our (research and development). But our culture and passion to serve this industry has not changed."
OSI SVP and Chief Marketing Officer Mike Nicastro agreed, adding, "our clients see this as a positive thing. They want us focused on the long term instead of having to think quarter to quarter. They see us as an innovator, and that's what we want to continue to be for them."
The deal is likely to be smiled upon by shareholders, as well, Nicastro suggested, noting it could mean as much as a 32% return for shareholders.
OSI put together a disinterested committee to study various options for raising the capital to take the firm to the next level. "We were looking at how do we grow this company, and how do we finance that growth," Goldwasser related.
Among the options were to do another offering, but the level of interest from the two private equity firms was such that the committee felt they could not be turned away.
"This is not a competitor buying us out. These are two premiere private equity firms who invest in healthy, well-managed companies and keep the management team intact," Goldwasser offered. "We are not resting on our laurels. Rather, we are continuing to enhance our products and come out with new products. This will allow us to continue doing just that."
In going back to being a private company, OSI moves to its new incarnation as a portfolio company, Goldwasser said.
Though the management team made a lot of money on paper when their options were automatically exercised when the stock surged to $37.56 on news of the pending transaction, Nicastro-who earned about $1.9 million himself-pointed out that those funds were being plowed back into the company as part of the deal with Carlyle and Providence.
"We had a reporter here the other day who was surprised to see that there were no champagne corks popping, no celebratory toasts," Nicastro related. "That's because we aren't done. There's still a lot of work to be done."
"Our credit unions are in a dog fight. They've got pressure from banks, they've got pressure from non-traditional competitors," Goldwasser added. "We believe technology gives them an edge. It's our job to provide them with that edge, and that job is not done."
CUJ Resources
For info on this story:
* www.opensolutions.com
* www.carlyle.com
* www.provequity.com
