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The field remains open in the fight to acquire U.K. banking software provider Misys PLC (MSY.LN), with two private equity firms--Vista Equity Partners and CVC Capital Partners Ltd.--still in the running after the original proposed merger with Swiss peer Temenos Group AG (TEMN.EB) was abandoned.
But Vista, whose 350-pence-a-share approach was recommended by the board of Misys two weeks ago, is likely to be the favorite to close the deal. In addition to the fact that its offer has been recommended by Misys' board, it can achieve synergies by combining Misys with another of its portfolio companies, meaning that it likely holds the cards, analysts say. It also has irrevocable support from two major shareholders.
Vista's offer value the company at GBP1.27 billion.
Further, competitor CVC Capital Partners, despite having the support of Misys' largest investor, San Francisco-based ValueAct Capital, will likely have to trump the agreed offer by at least 10% in order to win the backing of the remaining rump of investors.
CVC and ValueAct have said they are mulling a counter offer for Misys, but have yet to put a firm offer on the table.
On Tuesday, Misys' shares were trading up at 358 pence, indicating that the market still believes another offer may be forthcoming. But company watchers think that Vista's offer could be the best one.
"Vista could be in pole position with its offer for Misys," George O'Connor, at Panmure Gordon, said. O'Connor said that the industrial synergies that Vista can get from the business put it in a strong position.
On March 19, Vista agreed to buy Misys for 350 pence a share in a deal recommended by Misys' shareholders, and said it had irrevocable undertakings from nearly 22% of its shareholders through the backing of Threadneedle Asset Management and Schroder Asset Management. CVC Capital Partners, acting with ValueAct, has said it remains interested in a possible counter-offer and is evaluating a deal.
Vista--whose portfolio companies are overwhelmingly in the software and technology space--has some clear advantages over CVC due to its management expertise. The San Francisco-based company also owns Turaz, formerly the trade- and risk-management business of Thomson Reuters (TRI), then known as Kondor. Combining Misys and Turaz would be in the best interest of investors, customers and employees, Misys acting CEO Tom Kilroy previously told Dow Jones Newswires.
Analysts caution that it is too early to write CVC off. The buyout firm has traditionally been attracted to difficult investments and, with ValueAct on board, likely has some deep insight into how to reduce Misys' cost base. As Misys' largest shareholder, with 21.5% of the shares, ValueAct carries significant sway.
But Vista has the irrevocable support of 21.8% of the shares via two large institutional investors: Schroder Asset Management and Threadneedle Asset Management. In order to reverse the support of Schroder and Threadneedle--according to offer terms--a counterbid from CVC (or any other bidder) would have to be valued at at least 10% higher than the agreed offer from Vista: 385 pence a share or higher.
Technically, CVC could trump this offer with one lower than 385 pence through the support of ValueAct and other investors. But the higher threshold for these two shareholders to reverse their support puts significant pressure on CVC. Meanwhile, as an investor that has been agitating to secure a higher bid for Misys, ValueAct's future intentions are unclear.
"ValueAct is an unknown quantity as far as its intention is concerned," Peter King, a lawyer with Weil Gotshal, told Dow Jones Newswires. "CVC will have to perceive some pretty good value to get into a competitive bidding process."
King suggests that 385 pence may be a stretch for CVC, if they can't immediately see how to generate value.
- By Jessica Hodgson and Marietta Cauchi, Dow Jones Newswires; + 44 207 842 9373; email@example.com