Lawrie exits as Misys and Temenos agree key merger terms

Lawrie exits as Misys and Temenos agree key merger terms

Core banking vendors Misys and Temenos have agreed the key terms for their proposed merger, with shareholders of the UK firm taking 53.9% of the combined group and the Swiss outfit the remaining 46.1%.

Having confirmed last week that talks were ongoing, the pair now say that they have hammered out the key details of a deal with an exchange ratio of 4.1 Misys shares to one Temenos share.

Having spent five years radically restructuring the business, and after the failure to complete a sale of the company to FIS last year, Misys chief Mike Lawrie will now quit. It transpires that Lawrie is to take on the role of president and CEO of CSC, another bloated computing stock struggling to regain it's relevance in a rapidly changing market.

Guy Dubois, currently Temenos CEO, will take the same role at the combined group and Stephen Wilson, currently Misys CFO, maintaining that role. Andreas Andreades, until recently Temenos CEO will chair a nine man board with five nominations from Misys.

Misys' biggest shareholder, ValueAct Capital, has given the deal its "strong support" and will take a seat on the board of a new holding company that will look for a premium listing on the LSE and potentially a secondary one on SIX Swiss Exchange.

The new group, headquartered in Switzerland, will combine Temenos' presence in banking, wealth management and business-intelligence with Misys' strength in core and transaction banking, treasury capital markets and lending, says a statement.

The merger will also "yield significant cost savings and operational synergies through scale efficiencies and cross-selling opportunities".

Any deal still depends on the completion of mutual due diligence and agreement of definitive legal documentation, cautions the statement and the market's reaction has been subdued. Misys shares have fallen 14.7 pence, or 4.5%, to 3111.4 pence per share in morning trading. Similarly, Temenos is trading at CHF18.45, down 4.16%.

Finextra verdict: So, after years of speculation, the tie-up between Temenos and Misys has finally been realised in double quick time. If not exactly a shotgun wedding, the pairing raises many questions over the dowry bequeathed to the partnership. Banking clients will be anxious to learn the fate of the respective banking products under the newly merged entity. The new management team will have to come up with a clear roadmap for the future of a combined business that includes the competing BankFusion and T24 core banking packages and Misys' treasury and capital markets unit. Buckle your seatbelts, it's likely to be a lively ride ride.

Temenos response: Ben Robinson, director, strategic planning, Temenos, says that by consolidating, the companies can move beyond their traditional client base of tier three and four banks and better target tier one and two players. The firms believe that the world's big banks are now preparing to take the inevitable, cost-saving steps to packaged software and that the merger gives them the scale to take advantage. They also argue that the merger would convince banks that the new entity would be around for the long-term - an important consideration when choosing a technology provider.

Robinson says a merged company would continue to maintain and develop both the T24 and relatively new Misys BankFusion systems. However, the two would over time aim to converge onto a common platform, cutting R&D costs.

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