(Adds analysts' comments and background)
* FIS confirms preliminary approach for a possible cash
* Analysts say Misys could be worth nearly $2.4 bln
* Misys deal would give FIS access to Europe, Africa, Asia
* Fiserv, SunGuard could bid too; Temenos bid unlikely
By Brenton Cordeiro and Adveith Nair
BANGALORE/LONDON, June 23 Payment services
provider Fidelity National Information Services Inc
confirmed that it had approached Misys with a deal,
which analysts said could value the U.K.-based financial
software company at $2.4 billion.
A deal with Misys -- a provider of software to banks, fund
managers and traders -- could further beef up FIS' growing
international operations and help it break out of its maturing
FIS, which has been on the lookout for deals abroad,
reported $917 million in processing revenue from its
international operations last year, accounting for nearly 17
percent of its total revenue.
"Misys is very strong in eastern Europe, Africa, the Middle
East and parts of Asia," Matrix analyst Rajeev Bahl said. "Misys
has a very strong installed base on the core banking side, and
the deal gives FIS a route to market some of their products to
FIS, with a market value of about $9.5 billion, bought
privately held Belgium-based Capco for $292 million in cash last
year, adding a financial services consulting business to its
Misys on Tuesday disclosed that it had received a bid
approach, without revealing the identity of the suitor.
The company -- which competes with Temenos , FIS,
Fiserv and SunGard -- counts the world's
top 50 banks as customers.
"The transaction could be nicely accretive to cash
earnings," Robert W. Baird analyst David Koning said.
GOOD FIT FOR FIS
Analysts have said a deal could be struck at more than 450
pence a share, valuing the group at about 1.5 billion pounds
($2.4 billion). Misys shares have risen 8 percent this week,
valuing the company at 1.4 billion pounds.
A deal with that price tag would mark the second major
acquisition by FIS in the past couple of years.
In October 2009, Fidelity National bought peer Metavante
Technologies for $2.94 billion.
Charles Stanley analyst Tom Gidley-Kitchin said it was
"reasonable" to accept a price of 450 pence as a lower level,
taking into account synergies and "rarity value."
"There are very few companies in Misys's niche that could
offer the same sort of access and there would be significant
revenue synergies," he said. "You'd be looking to value Misys on
an acquisition basis, not in terms of its current value."
"We wouldn't be advising anyone to sell below 450 pence," he
said. "It could well be higher than that."
Bahl said a price of 450 pence a share -- 26 times current
year earnings and 21 times next year earnings -- was a premium
to recent banking software deals.
FIS would need to take on a significant amount of debt to
finance this deal, analysts say.
As of March 31, FIS, which serves more than 14,000
institutions in over 100 countries, had $384 million of cash and
nearly $4.5 billion in long-term debt.
FIS itself was a part of a reported failed takeover attempt
last year by a consortium led by private equity firm Blackstone
Group LP . Following which, the company authorized a
leveraged recapitalization plan and repurchased about $2.5
billion of its common stock.
Analysts feel Misys' other competitors could also be
interested in bidding for the company, but ruled out Temenos, a
Swiss rival in retail banking software, saying the deal could be
too big for the company.
"Fiserv is a possibility," Bahl said. "And SunGuard for
similar reason as FIS - access to international markets."
"Those are the ones I would put on a white list."
($1 = 0.618 British Pounds)
(Reporting by Adveith Nair in London and Brenton Cordeiro in
Bangalore, additional reporting by Anirban Sen in Bangalore;
Editing by Matt Scuffham, David Cowell, Saumyadeb Chakrabarty)