Since departing U.S. Bancorp as its president and chief operating officer in 2001, Philip G. Heasley has wanted to land the top job at a financial company.
With his appointment last week as president and chief executive of the banking technology vendor Transaction Systems Architects Inc., Mr. Heasley is getting his wish, and one of his first management duties is dealing with an institutional shareholder pressuring the Omaha company to put itself on the block.
After he left U.S. Bancorp, Mr. Heasley was named the CEO of Bank One Corp.'s First USA credit card unit, where he remained until July 2003.
That position did not satisfy him, he said. "I wasn't going to be running large divisions of corporations. I wanted to run a company."
Transaction Systems has three divisions - ACI Worldwide, which develops software for automated teller machines and point of sale transactions; IntraNet Inc., which produces the PaymentWare suite of software products for high-value and bulk file payments; and Insession Technologies, which provides infrastructure software and services.
Though Transaction Systems is much smaller than the banking giants where he has previously worked, Mr. Heasley said it has strong potential.
"I think this is a fantastically positioned company," he said. "I would call it the gold standard for single-message format payments." Debit transactions use a single-message format for authorization and execution. Credit cards use a dual-message format, with authorization first and payment later.
Transaction Systems' customers include Bank of America Corp., Canadian Imperial Bank of Commerce, Barclays PLC, Royal Bank of Scotland, and Huntington Bancshares Inc. More than half of its business comes from overseas; it said in February that Rwanda had started using Transaction Systems software to modernize the country's payments network.
"We're in an interesting space, and we have the right customers," Mr. Heasley said.
Before taking over at Transaction Systems, Mr. Heasley, 55, formed Paypower LLC, where he was chairman and chief executive. He described the Minneapolis company as an investment and advisory vehicle, and said he had looked at acquiring a couple of transactional "switches" but never reached any deals.
In fiscal 2004, which ended Sept. 30, Transaction Systems' net income tripled, to $46.7 million, and its revenue rose 6%, to $292.8 million. In the first quarter of fiscal 2005 its net income grew 29%, to $12.9 million, or 34 cents a share, and revenue grew 8.9%, to $80.6 million.
Not everyone, however, is happy with the performance. In an open letter to Transaction Systems chairman Harlan Seymour on Feb. 14, the San Francisco hedge fund Jana Partners LLC urged it to step up its stock buyback program and explore a sale. Jana said then that it had a 4.9% stake in the company.
Transaction Systems responded the next day with a press release in which Gregory D. Derkacht, Mr. Heasley's predecessor as president and CEO, said flatly, "TSA is not for sale."
Transaction Systems' stock price has bounced from about $18 at the start of this year to between $22 and $24, where it has hovered for the past month. That's less than half of the $50 peak it reached in 1999 but well up from the $4.26 floor it hit in 2003. Jana's managing partner, Barry Rosenstein, did not return calls.
Mr. Heasley said he has not spoken with the dissident shareholder, but, "I think both Jana and I are in total agreement that there's great value in this company."
However, he said he could not discount the hedge fund entirely. "Jana is a large stockholder. We are in business for our owners."
Jana has a track record of putting public pressure on its portfolio companies. Last year it urged InterCept Inc., an Atlanta core processing outsourcer, to sell itself. InterCept resisted at first but eventually agreed to be bought by Fidelity National Financial Inc. of Jacksonville, Fla., which has been an active acquirer of financial technology companies for the past two years.
More recently, in November, Jana pressured a Canadian vacation-travel company called Transat A.T. Inc. to implement a large-scale stock buyback to lift its stock price.
Mr. Heasley would not say whether he plans to explore a sale of the company, nor would he comment on Jana's previous success with InterCept, noting that he is on Fidelity's board of directors. "I can't go in that direction. I wouldn't be a very good director."
Mr. Heasley is not the only link between Transaction Systems and Fidelity; one of the vendor's past board members was Frank Sanchez, who is currently president for product strategy and development at Fidelity Information Services Inc. He joined Fidelity in April 2004, when it bought his company, Sanchez Computer Associates Inc.
Daniel Murphy, Fidelity's senior vice president of finance and investor relations, said Friday that Mr. Sanchez had recently stepped down from the Transaction Systems board, choosing not to stand for reelection.
Mr. Murphy said that he was not aware of any plans for Fidelity to consider buying Transaction Systems, and that the first he had heard of the company was when he saw the announcement of Mr. Heasley's appointment.
Mr. Heasley said he had been in discussions with Transaction Systems for about four months, after Mr. Derkacht announced plans last September to retire by June 2006, when his employment contract expires. Transaction Systems said in a regulatory filing that Mr. Derkacht had been named executive vice president, and a spokesman said the idea behind that move was to facilitate Mr. Heasley's transition.
Mr. Heasley was cautious about discussing his plans for the company, pointing to the fair-disclosure requirements of securities regulation. But he was enthusiastic about the debit business and said he sees good prospects in Latin America and other developing nations that are just now building modern payment systems.
"Asia, for instance, is a huge opportunity for us - all parts of Asia," he said.
