A sharp drop in its stock price in the past week has made Online Resources Corp. more likely to be acquired, analysts say.
The Chantilly, Va., online banking and bill-payment provider's stock dropped more than 30% Friday, a day after it issued its third-quarter earnings report and said it had lost a large client, Jack Henry & Associates Inc. It also received two unfavorable notes from analysts.
The lowered price has attracted interest from prospective buyers, Matthew P. Lawlor, Online Resources' chairman and chief executive, said in an interview Wednesday.
"When the price goes down, obviously we understand and appreciate that the desire to do something with us goes up," he said, but his refusal to accept any of the offers "was not altered at all by today's stock price."
Online Resources simply has yet to receive the right offer, Mr. Lawlor said. "It may make sense at some point in time that we affiliate ourselves with a bigger company. It's not off the table … but that's not what we want today."
Nevertheless, "five minutes from now, that kind of reasonable offer could come in, and we would pursue it," he said.
As one of the last major vendors in the bill-payment market that is not part of a larger technology firm, Online Resources has the advantage of being more agile than its rivals, such as Metavante Corp. and CheckFree Corp., Mr. Lawlor said.
After Fiserv Inc. acquires CheckFree this quarter, "I think they are going to lose focus, and I'd be shocked if they don't," he predicted. "Fiserv has a bigger agenda."
Mr. Lawlor made a public show of confidence in the company, issuing an open letter to shareholders Tuesday touting its future prospects and vowing to buy about 10,000 shares today, depending on the price. He already owns more than a million shares, according to an August filing with the Securities and Exchange Commission.
The shares climbed 9% Tuesday, and by Wednesday afternoon they had gained another 4.79%, to $9.18. On Oct. 25, before Online Resources issued its earnings report, the stock closed at $12.29.
Analysts said the share price is making prospective buyers all the more interested.
"Price is always a big factor," and Online Resources is "a pretty attractive property," Matthew J. McCormack, an analyst at Friedman, Billings, Ramsey & Co. Inc., said in an interview Tuesday. There are only a few "bill-pay networks out there, really, and it's the only one that's independent."
In a note published Friday, he said that the stock would remain weak, and that plans to review his "outperform" rating for the stock.
Online Resources, which moved into the top ranks of the bill-pay market last year with its purchase of Princeton eCom Corp., would be a very appealing company to have, Mr. McCormack said in the interview, but the CEO's willingness to sell is a major issue.
Some doubt that Mr. Lawlor is willing to sell, Mr. McCormack said. "He's said two quarters ago that the company's not for sale, and that upset investors because that's not his decision to make. It's the board's."
Even though a lower price may spark interest among prospective buyers, Mr. McCormack said, it may have had the opposite effect on Mr. Lawlor, who clearly thinks his company is worth more.
Edward Woods, a senior analyst for the Boston market research firm Celent LLC, said that interest in buying Online Resources may come from the companies that once competed with it to buy Princeton eCom.
"One of the things that eCom had was a ton of biller relationships, and biller relationships are beyond important if you want to remain in the bill presentment business," he said.
The list of potential buyers includes Fiserv, CheckFree, and possibly even Intuit Inc., which bought the online banking provider Digital Insight Corp. in February, Mr. Woods said.
"Intuit's going to invest more in Digital Insight," he said, and one way to do it is to give it an in-house bill-payment capability.
John Kraft, an analyst with the investment firm D.A. Davidson & Co., said that even though Online Resources' stock has fallen, "I do not think that the value to an acquirer has diminished at all."
The drop "really makes a takeout more likely for two reasons," he said. "One, it probably brings the company to potential acquirers' attention, and two — and they are, I guess, related — it probably forces the board to be more willing to consider an offer."
Any offers Online Resources may have received before its stock started to dive are probably still on the table, and an offer based on the previous share price would look more appealing today, said Mr. Kraft, who has a "buy" rating on the stock.
He named several potential suitors, including Fidelity National Information Services Inc., M&F Worldwide Corp.'s Harland Financial Solutions Inc., Intuit, and even Jack Henry — though he admitted a deal to sell to Jack Henry would be "a little bit ironic."
"I don't think there's any shortage of acquirers."
(Spokespeople for Fidelity, Harland, Fiserv, Intuit, and Jack Henry either would not discuss the speculation or did not respond to requests for comment by press time.)
According to Mr. Kraft, the tough part for any acquirer would be persuading Mr. Lawlor and his board to sell.
"They have a pretty high view of where they think they can get this company, so selling today is a bit short-sighted in their view, and I don't think that's changed," Mr. Kraft said. "But the truth of the matter is you have a fiduciary responsibility to take care of your shareholders."
He called the stock decline an "emotional selloff," and a sign that some shareholders are frustrated.
Mr. Lawlor's letter to shareholders was an effort to address this, according to Mr. Kraft.
"Matt Lawlor, the CEO, he's a conscientious guy. This is his baby, and he's got a lot of longtime shareholders that he feels a lot of responsibility for. This is an effort to reassure these people, and he cares," Mr. Kraft said. "I still wouldn't say these guys are out looking to sell, by any stretch," but "it's notched up the chances."
