A possible deal between bank technology vendors Fidelity National Information Services Inc. and Misys PLC has fallen through after the companies failed to agree on price.
FIS said Thursday it is no longer considering making an acquisition bid for competitor Misys and instead plans to buy back stock. FIS did not give a reason for its decision but Misys said in a statement that an offer it received last week from FIS was inadequate.
"The board believes this offer from FIS materially undervalues the company and therefore unanimously decided to reject it and took the decision to withdraw from further discussions with FIS," the U.K. vendor said in a press release.
FIS, of Jacksonville, Fla., said in a press release that it reserves the right to make an offer for Misys in the future if Misys' board agrees to or recommends one. In a separate release, FIS said it plans to begin repurchasing its common stock through an existing buy-back plan, under which 13.6 million shares are still available for purchase.
"We believe that share repurchases represent a very attractive use of capital at this time," Frank Martire, the president and chief executive of FIS, said in the release. "This action clearly indicates our confidence in the continued success of FIS and is consistent with our strategy to effectively deploy capital to fund growth initiatives, manage financial risk and return value to our shareholders."
FIS representatives did not immediately return calls for comment on Thursday morning.
FIS in June announced it had approached Misys about possibly making a bid for the U.K. company, which as of last year was the largest non-U.S. core processing vendor for banks with more than 1,200 financial institutions in about 120 countries using its software, according to an October report by Aite Group LLC. FIS has been pushing to further expand its international presence, which has helped fuel recent revenue growth.
Press reports and analysts had suggested FIS could pay $2 billion or more for Misys.
"We viewed the uncertainty of the negotiations … as a weight on [FIS'] shares and we expect the cessation of merger talks will allow the shares to lift," Peter Heckmann, an analyst with Avondale Partners LLC, wrote in a research report published Thursday.
A possible FIS-Misys combination was one of several possible or planned deals in the financial tech sector.
Payments software vendors S1 Corp. and Fundtech Ltd. have agreed to a merger the companies say could close in the fourth quarter, though competitor ACI Worldwide Inc. is trying to thwart that deal through an unsolicited bid to buy S1 for $540 million.
Fiserv Inc., one of FIS' biggest competitors, in June announced it was buying the smaller online payments vendor CashEdge Inc. for $465 million.
The increased vendor M&A activity is indicative of banks' desire to consolidate their supplier relationships to cut costs and ease information-technology management demands, analysts say.