Following the broken engagement with Temenos (see here), Misys has moved closer to PE firm Vista Equity Partners. Misys management has recommended the £1.27bn (350 pence per share) all cash deal, which is being made via Magic Bidco, an investment vehicle set up specifically to make the Misys acquisition.
Although the deal fell through in the light of interest by two other parties (including Vista, see here), Misys was keen to conclude the original Temenos deal quickly. It will be keen to progress the Vista offer too based on its latest interim numbers, which show the impact of ownership uncertainty. However, the other interested party, PE combo CVC Capital Partners/ValueAct Capital Master Fund, is still in play and could come up with an alternative offer - it has until April 2.
During Q3 (to February 29 2012) revenue was down on all fronts. Overall revenue was down 12%, Banking dropped 11% and TCM and Sophis each fell by 12%. Overall order intake was down 18%, with most of the drop caused by TCM, which plummeted 45%; Banking was up 1% and Sophis improved by 16%. The year to date figures are better but still down (overall revenue down 3%), ratifying the need for proactive action beyond the cost cutting plans Misys announced in February (see Misys acts to cut costs as market deteriorates).
In our view, Vista is the stronger contender compared to CCV/ValueAct (see Misys/Temenos halted by Vista Equity Partners?) given its existing investment in the sector. Most recently, it concluded the acquisition of Thomson Reuters – Trade and Risk Management (now known as Turaz) in January 2012. Using Turaz and (it hopes) Misys as the base, Vista wants to become “the global leader” in core banking treasury management, capital markets and enterprise risk management, so it will be hungry for acquisitions. The troubled sector is crowded – in addition to Temenos, Infosys and TCS provide banking software, as do SAP and Oracle. Now Vista is emerging as another potential contender. With CVC/ValueAct in the background, the deal is not a certainty and a bidding war could yet ensue.