Eight months after paying $1.05 billion for Alltel Corp.'s deposit processing division to enter the core banking business, Fidelity National Financial Inc. announced plans Wednesday to buy a much smaller company in the same line.
This time it is to pay $175 million for Sanchez Computer Associates Inc. At $6.50 per share, that represents a 16% premium over Sanchez's closing price Tuesday on the Nasdaq Stock Market.
The companies said the deal will close in the second quarter.
Though Sanchez's customers tend to be much smaller, Fidelity National says Sanchez's real-time core processing system, called Profile, is more advanced than its own Impacs system.
William P. Foley 2d, Fidelity National's chairman and chief executive officer, said it would have taken it three years and more than $100 million to update Impacs.
In a telephone interview Wednesday, Mr. Foley said Fidelity National plans to maintain both Impacs and Profile. He said he would "absolutely not" retire Impacs, though Impacs users may choose to migrate over time to the more advanced Sanchez system.
Fidelity National is based in Jacksonville, Fla., Alltel in Little Rock, and Sanchez in Malvern, Pa.
Fidelity National has made a series of acquisitions to round out the offerings of its Fidelity Information Services, which is based on the former Alltel division. Last year it bought WebTone Technologies Inc. to gain its TouchPoint software for customer relationship management, branch automation, and call centers; and Hamilton & Sullivan Ltd., a developer of online-banking, wire-transfer, cash-management, and account-analysis software.
"We have a piece of Swiss cheese with FIS. We're filling in the holes," Mr. Foley said.
Sanchez will expand Fidelity Information Services' revenue by more than 10%, he said. The Fidelity National unit had about $950 million in sales last year, and Sanchez had $100 million.
Michael Sanchez, the chairman of Sanchez Computer, said Fidelity National's financial strength could help win business from companies that might have been reluctant to bet on the smaller company. "It's better to be a big company," he said in an interview Wednesday. "Fidelity is in it to win, to be the dominant technology solutions provider in this space, and we want to be part of that."
Mr. Sanchez said that he and his brother Frank, the chief executive officer, plan to stay on after the merger, though their roles have yet to be defined.
Fidelity National says it is the U.S. leader in deposit servicing, processing more than 30% of deposit accounts for the top 25 U.S. banking companies, including Citigroup Inc., Bank of America Corp., J.P. Morgan Chase & Co., and SouthTrust Corp. It claims 25 clients among the top 100 U.S. banks.
Sanchez says it provides software and services to approximately 400 financial institutions in 22 countries.
Christine Barry, the wholesale banking analyst at the research and advisory firm Celent Communications of Boston, said the acquisition should provide give Fidelity National a boost in international banking, where Sanchez is stronger, and a more advanced core banking system.
She said she doubts that Fidelity National will maintain both Impacs and Profile for long. "It doesn't make sense to be offering two solutions," she said, so Fidelity National will probably "sunset" Impacs.
Fidelity National announced the deal on the morning of its fourth-quarter earnings conference call. The company reported late Tuesday that its net earnings for the quarter rose 12% from a year earlier, to $196.2 million. But per-share profit fell to $1.28, in line with analysts' expectations, because shares were issued to finance several acquisitions last year. Revenue climbed 25%, to $2 billion.
Fiserv also reported fourth-quarter numbers Tuesday. The giant core processing vendor said net income rose 20%, to nearly $82 million, or 42 cents per share, as revenue surged 28%, to $837.3 million.
For the full year, revenue climbed 21%, to $3 billion. Net income rose 18%, to $315 million, or $1.61 per share, and Fiserv said it expects to earn $1.86 to $1.93 per share this year. The Brookfield, Wis., company completed 12 acquisitions in 2003.
