S1 Corp. and Fundtech Ltd. are merging in a stock swap valued at approximately $700 million, the companies said Monday.
S1 is an Atlanta-based provider of online banking and payments software with more than 3,000 clients worldwide. It also is owner of PM Systems Corp., a South Carolina-based provider of online banking and security services to about 175 credit unions.
Fundtech is an Israeli company with U.S. operations based in Jersey City, N.J., and said it has a client list of more than 1,000 companies worldwide using its wire transfers, ACH origination, cross-border payments and remittance. Fundtech said it also operates the world's largest SWIFT service bureau.
When the transaction closes, S1 shareholders will own approximately 55% of the company and Fundtech shareholders about 45%, the companies said. The two companies had combined revenue of $95 million in the first quarter and no debt, they said.
Fundtech will be the name of the combined companies. Fundtech’s Reuven BenMenachem will be executive chairman and S1’s Johann Dreyer will be CEO, they said. Atlanta will be corporate headquarters.
"The future of the transaction banking industry is highly dependent upon innovation and state-of-the-art solutions and this combination will put us at the forefront of these advancements," Dreyer said. "This merger will expand our geographic footprint and enhance our ability to accelerate revenue growth and increase profitability."
Aite Group research director Christine Barry said Fundtech had been mentioned as a takeover target in recent days but that she did not expect S1 to be the suitor.
“There were talks about a possible merger last week for Fundtech, but I don’t think too many people expected it to be with S1," she said.
"While surprising, both companies have much to benefit. As two leaders in the cash management space, there were be an opportunity for the newly combined company to establish a dominant role in that market. Additionally, Fundtech will be able to expand its product offerings vertically not only into consumer online banking, but also voice, branch and lending," Barry said.
"It will also better position the company to take advantage of opportunities in the small institution space. Its success in this market had been limited in the past due to its lack of a retail offering. S1 will also benefit from Fundtech’s stronger end-to-end payments capabilities and financial stability. Both will enjoy new cross-selling opportunities,” she said.