By acquiring the software maker VectorSGI Inc., Metavante Corp. would bring under one roof the key technology for two important electronic check exchange networks and solidify its position as an image exchange and payments powerhouse.
Last week the technology subsidiary of Marshall & Ilsley Corp. announced a deal for VectorSGI, including the gateway software that lets banks use the fledgling image exchange system from Clearing House Payments Co. LLC.
In June, Metavante acquired CheckClear LLC, which operates Endpoint Exchange, the nation’s only system currently being used to exchange images on a commercial basis. That same deal included Advanced Financial Solutions Inc., which developed the Endpoint software.
Paul T. Danola, the executive vice president of Metavante’s financial services group, called the VectorSGI and CheckClear systems complementary.
“We felt VectorSGI was a well-known, respected player in the payment and check processing arena that would be a tremendous asset to us in that market space,” Mr. Danola said in an interview.
Analysts said the Clearing House and Endpoint networks fill different market needs. They noted that Clearing House Payments’ Small Value Payments Co. division is developing a large-scale batch processing system, while the Endpoint network provides real-time settlement by sending a trickle of images across its network throughout the day.
And they agreed that buying VectorSGI would add to Metavante’s growing list of key acquisitions in the payments market.
Aaron McPherson, the research manager of payments at the research firm Financial Insights Inc. of Framingham, Mass., pointed to some of Metavante’s past acquisitions — including the debit processor NYCE Corp., acquired in July, and the Spectrum EBP LLC bill-payment system, acquired in August 2002 — which also complemented its credit, debit, and online billing products.
“They’ve got cards. They’ve got checks,” he said. “They’re putting together all the components they would need to become a general purpose payments processor.”
Metavante said it would buy VectorSGI, of Addison, Tex., from the buyout boutique Thoma Cressey Equity Partners for $100 million, plus as much as $35 million more if VectorSGI reaches certain performance goals. The deal is expected to close next month.
Metavante said M&I plans to issue approximately $150 million of common stock this quarter to pay for this acquisition and for other corporate purposes.
VectorSGI’s offers image and payment processing products to the nation’s largest banks. Its current hot seller is the Distributed Traffic Agent, which 27 big-bank customers have installed or are currently installing it to transmit large batches of check images to trading partners for settlement across the SVPCo network.
Last month VectorSGI introduced a hosted version of that software that could be used by all of SVPCo’s 1,600 bank customers to clear images.
The Endpoint network is designed primarily to serve Metavante’s traditional customer base: small banks.
Metavante is “obviously going to be a very dominant player now” in image exchange, said Beth Robertson, a senior analyst at TowerGroup, a Needham, Mass., market research unit of MasterCard International.
