DH Corp buys fintech co Fundtech for $1.25b

deal  merger  picture: photo to go
deal merger picture: photo to go

Israel's Clal Industries sold its stake in Fundtech in 2011, at a company value of only $390 million.

Less than three and a half years after Clal Industries and Investments Ltd. (TASE: CII) sold its sake in technology company Fundtech at a company value of $390 million, the latter has been sold again, this time for more than triple its previous price.

Fundtech, which has offices in Herzliya and is active in financial technology, providing financial software solutions for clearance and processing of automatic payments, has been sold for $1.25 billion to Canadian company DH Corporation, listed on the Toronto Stock Exchange at a market cap of C$3.4 billion ($2.7 billion).

The seller is US private equity fund GTCR, whose investment in Fundtech has been spectacularly successful. GTCR acquired its controlling interest in Funtech mainly from Clal Industries, a subsidiary of IDB Development Corporation Ltd. (TASE:IDBD), then controlled by Nochi Dankner.

IDB was already in serious financial trouble in October 2011, when that sale was made. Shortly before the sale, IDB Development reported a huge NIS 1.76 billion quarterly loss, with its equity moving into the red as a result of a write-down of the value of its investments in Credit Suisse and Las Vegas land and lower profits by Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Shufersal Ltd. (TASE:SAE).

Clal Industries, which sold its Fundtech shares for $200 million, made a NIS 412 million capital gain on the deal - not bad, but far from the dizzying exit achieved by GTCR, a fund founded in 1980 that has invested over $10 billion to date in over 200 companies.

Fundtech was founded by CEO Reuven Ben Menachem, who managed the company both before and after its sale to GTCR. It appears that Ben Menachem will remain with the company after its acquisition by DH, but as a consultant, not as CEO.

When GTCR acquired Fundtech in late 2011, the latter was a public company listed on both Nasdaq and the Tel Aviv Stock Exchange (TASE), but GTCR made it a private company. Now, however, as part of DH, Fundtech will be public once more. The 2011 acquisition was preceded by an attempt to merge Fundtech with S1 in a share swap reflecting a $315 million company value for Fundtech. Another company, ACI attempted to derail this merger between two of its competitors by submitting an offer to purchase for S1. In the end, Fundtech got an offer from GTCR and canceled the deal with S!, which was indeed acquired by ACI shortly afterwards.

Like Fundtech, DH is a provider of technology to the financial industry. "I'm very proud of the company and the culture that we have built, and believe that the DH's philosophy of focusing on the customer and its expertise in the financial technology industry constitute an excellent strategic match for us. Fundtech's joining DH will create new opportunities for our employees and customers," Ben Menachem said.

As of now, 300 of Fundtech's worldwide total of 1,600 employees are in Israel. No layoffs are expected following the acquisition. After the deal is completed, the combined DH-Fundtech company will have 5,600 employees and a customer base of 8,000 companies, including eight of the world's 10 largest banks and 190 of the 300 largest banks in the US. Completion of the acquisition is slated for the second quarter of this year.

Published by Globes [online], Israel business news - www.globes-online.com - on March 31, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

deal  merger  picture: photo to go
deal merger picture: photo to go
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