UPDATE 4-Fundtech drops S1 for 'superior' PE offer

* GTCR's $23.33/shr cash offer at 33 pct premium to Fundtech Wed close

* GTCR to pay $11.9 mln termination fee to S1

* S1 has 5 business days to make counter offer

* Fundtech shares up 30 pct (Adds analyst comment, background, updates share movement)

By Tanya Agrawal and Brenton Cordeiro

Sept 15 (Reuters) - Israel's Fundtech Ltd dropped S1 Corp's proposal after receiving a "superior" all-cash offer from private-equity firm GTCR, leaving S1 with few options but to consider ACI Worldwide's bid for the company.

S1, which has reiterated its stand to merge with Fundtech, may find it tough to come up with a better offer due to lack of support from its shareholders who are likely to be swayed by the large premium that bigger rival ACI is offering.

The merger saga has been playing out back and forth between financial technology providers ACI and S1, with ACI increasing its cash component of the deal that was spurned by S1, prompting ACI to go hostile.

The surprising move by GTCR couldn't have come at a better time for Israel-based Fundtech, which has been in a state of limbo ever since ACI Worldwide announced its intention to buy S1 in July.

"I think others have had their eye on Fundtech for a while and going for an alternative offer before S1 makes its decision makes more sense since it gives them room to negotiate a higher price," analyst John Kraft of DA Davidson told Reuters.

S1, which has five business days to make a counter proposal to GTCR's offer, said it is consulting with its legal and financial advisors and is currently reviewing its options. They declined to comment further when contacted by Reuters.

S1's all-stock offer for Fundtech valued each Fundtech share at $24.70 based on S1's Wednesday share closing price. GTCR is offering $23.33 per Fundtech share in cash.

"I doubt that S1 will increase their offer for Fundtech, simply because it would be hard for S1 management to convince shareholders to turn down the premium and immediate cash on hand that is being offered by ACI," Kraft said.

GTCR has also agreed to pay a $11.9 million termination fee to S1.

Based on 15.6 million shares outstanding as at April 15, GTCR's offer values Fundtech at $363.7 million, as per Reuters data. The offer price is at a premium of nearly 33 percent to Fundtech's Wednesday close on Nasdaq.

S1 had been looking to tap into Fundtech's presence in India and western Europe.

However, payments processing service provider Fundtech has notified S1 of its intention to end its deal with the company and enter into a new agreement with GTCR.

GTCR would enter a voting pact with Clal Industries and Investments Ltd, which owns a majority stake in Fundtech, following which Clal will likely vote in favor of the deal with GTCR, Fundtech said.

Chicago-based GTCR is looking to combine Bankserv, a company in its portfolio, with Tel Aviv-based Fundtech to create a new entity that will be headquartered in New Jersey.

The deal is expected to close in the fourth quarter, GTCR said in a statement.

Fundtech shares were up 30 percent at $22.89 in morning trade on Thursday on Nasdaq. S1 and ACI's stock was trading higher by about one percent. (Reporting by Tanya Agrawal, Brenton Cordeiro and Gowri Jayakumar in Bangalore; Editing by Hans-Juergen Peters, David Holmes, Viraj Nair)