Last month, S1 agreed an all-stock merger with transaction banking vendor Fundtech in a deal valuing the combined entity at around $700 million.

However, ACI has moved to scupper the deal, offering to pay $9.50 a share in cash and stock for S1, a 33% premium on the vendor's closing price yesterday, valuing it at around $540 million. Approximately 60% of the payment would be in cash and the rest in ACI stock.

ACI has secured financing from Wells Fargo for the deal, which would see its shareholders own around 85% of the merged entity upon completion, which could happen by the fourth quarter.

In a letter to the S1 board, ACI says: "We believe that our premium stock and cash proposal is both financially and strategically superior to your proposed transaction with Fundtech. Our proposal offers substantially greater current financial value to S1 shareholders in the form of a meaningful premium to the current stock price and a clearer, more expedient path to value creation over the long-term through the realisation of significant synergies, with less risk and uncertainty than the Fundtech transaction."

An ACI-S1 combination would benefit from complementary products and expanded customer bases, enhanced margins, an expanded presence in high-growth international markets and "substantial synergy opportunities", says the letter.

Philip Heasley, president and CEO, ACI, says: "We are confident S1 shareholders will share our strong belief that ACI's premium proposal is superior to and provides S1 shareholders with significantly greater value than the pending transaction with Fundtech. We expect S1's Board to recognise the considerable financial and strategic benefits to S1 and its shareholders inherent in a combined ACI-S1, and ACI is ready and willing to complete this transaction and we are prepared to do what is necessary to make that happen."

S1 has issued a brief statement, saying: "As previously announced, on June 26, 2011, S1 and Fundtech executed a merger agreement, which provides for the combination of the two companies. S1 continues to be bound by the terms of the merger agreement with Fundtech.

"S1's Board of Directors will review the terms of the proposal submitted by ACI in a manner consistent with its obligations under the merger agreement with Fundtech and applicable Delaware law."