In its biggest deal to date, outsourcer Fiserv Inc. said last week that it would buy bank software firm Information Technology Inc. for $373 million in cash and stock.
Officials as Milwaukee-based Fiserv said the pending acquisition of privately held Information Technology, also known as ITI, will consist of $249 million in cash and the rest in shares of Fiserv common stock. They added they expect the acquisition to be nondilutive, as it will immediately contribute to Fiserv's 1995 earnings.
Lincoln, Neb.-based ITI is one of the country's leading suppliers of core accounting software to community banks. It has over 1,000 customers ranging in size from start-up institutions to a bank with $2.8 billion in assets. Its software runs on Unisys Corp. computers, and ITI is one of Unisys' biggest equipment resellers in the banking industry.
The company is also extremely profitable, according to industry observers. Fiserv officials said Information Technology had over $100 million in revenue in 1994 and employs 229 people.
"The quality of the organization is outstanding - it's well worth the price," said George Dalton, Fiserv chairman and chief executive.
He added that ITI is "not a typical software company," as between 75% to 80% of its revenues are recurring, consisting mainly of software maintenance fees from existing clients. That fact should be greeted warmly by Wall Street, as investors typically favor technology companies with consistent earnings streams.
In addition, ITI and Fiserv led all financial systems firms in bringing new clients in 1994, according to M. Arthur Gillis, a community bank systems consultant based in New Orleans. "ITI and Fiserv signed up 250 financial institutions that changed their system last year - that's a phenomenal number in a consolidating market," Mr. Gillis said.
Fiserv is already a big user of ITI software, running it in eight of its data centers, serving over 200 banks.
"Our decision to have ITI become part of the Fiserv family was based on our belief that combining the two companies would better serve ITI's clients and employees," said Donald F. Dillon, ITI's president. "The goal of ITI has always been to maintain continual growth to better meet the needs of our clients and employees. We will continue to focus on this goal as part of the Fiserv organization."
Mr. Gillis said Mr. Dillon could easily have taken his company public in order to grow, but instead chose the marriage with Fiserv, which has a history of keeping the management of firms it acquires.
"Investment bankers have been calling me for years asking, 'How can I get to Don Dillon?'" Mr. Gillis said. "But I can't think of a better acquirer than Fiserv."
Mr. Dillon will continue to run ITI and will join Fiserv's board of directors as a vice chairman, company officials said.
