BANGALORE Based payment processor Fidelity National Information Services (FIS.N) dropped plans to buy British software company Misys MSY.L, and said it would instead begin buying back its shares under an existing repurchase program.
FIS gave no reason for walking away from the deal, which would have valued Misys at around $2.4 billion, but the financial industry-focused UK firm said it rejected a revised offer which it felt undervalued the company.
FIS Chief Executive Frank Martire said buying up the shares would be "a very attractive" use of capital at this time. The Jacksonville, Florida-based firm has about 13.6 million shares available for repurchase under a buyback program approved in February last year.
Misys shares fell almost 20 percent on Thursday, and analysts said the withdrawal of the offer highlighted recent tough trading in the sector.
Matrix analyst Rajeev Bahl said signs of weaker demand, as indicated by a warning last month from Swiss banking software peer Temenos (TEMN.S), could have been a factor in the decision to pull the bid.
"There are no other bidders for Misys at this stage, and we expect this process would have flushed out any other interest," Bahl said. "We expect Misys to return to trading ex any bid premium (the undisturbed price prior to media reports of a possible deal is 320-330 pence)."
David Toms at Numis said the tech sector was clearly moving into a "choppier trading environment."
"The collapse of a bid that (Misys) management were using last week as a validation of the strength of the business suggests that an informed trade buyer didn't perceive that same strength," he said.
In June, FIS confirmed it had approached Misys with a deal.
"FIS investors will likely view the fallthrough of a Misys deal positively, as many were worried that a transaction would increase leverage and risk," said Robert W. Baird analyst David Koning.
Fiserv (FISV.O) and SunGard BAINSD.UL, which like FIS and Misys, also provide IT services and systems to the financial sector, were also rumored to have been interested in Misys.
Misys was advised by Barclays Capital and JPMorgan Cazenove on the discussions.
FIS' shares were trading flat at around $29 in early Thursday trade on the New York Stock Exchange.
(Reporting by Brenton Cordeiro in Bangalore and Kate Holton in London; additional reporting by Sakthi Prasad in Bangalore and Paul Sandle in London; Editing by Andrew Callus and Ian Geoghegan)