FIS sale of SunGard PS&E is busted: sources

SunGard Data Systems Inc’s sale of its public sector and education business is busted, three sources familiar with the transaction said.

Offers for the unit came in so low that it was “irrational for the seller to sell,” one of the sources, a banker, said. How much the bids were is unclear.

In March, Reuters reported that Fidelity National Information Services Inc was looking to sell the SunGard unit. FIS was seeking $1 billion for SunGard PS&E, the story said. Barclays advised on the process, Buyouts reported.

SunGard’s public sector business provides software and services for local governments, public safety, justice agencies and non-profits. SunGard K-12 supplies software and professional services to help K-12 schools and school districts.

Buyouts reported in July that bids came in low and strategics had dropped out of the auction. This left private equity firms to compete for the SunGard PS&E unit, Buyouts said.

In July, FIS reported that second-quarter revenue increased 45 percent to $2.3 billion, while operating income fell 1.4 percent to $283 million. The company said declines in its operating income and net income were driven by M&A-related charges, including gains on gaming contract sales, and charges related to the SunGard acquisition.

FIS also categorized SunGard’s PS&E financials under “corporate and other,” a June 30 SEC filing said. Q2 processing and service revenue for “corporate and other” dropped nearly 6 percent to $95 million. Adjusted EBITDA totaled a loss of $41 million, the filing said.

UPDATE: Second-quarter adjusted revenue for “corporate and other” was $154 million, including $60 million from public sector and education, according to an FIS earnings slideshow.

FIS launched the PS&E auction just months after closing its buy of SunGard, a software and tech-services company, for $9.3 billion in late November.

Seven sponsors — including Bain Capital, Blackstone, Goldman Sachs Capital Partners, KKR, Providence Equity Partners, Silver Lake and TPG — were the sellers. The PE firms acquired SunGard in August 2005.

The $11.4 billion SunGard acquisition is considered one of the signature deals of the buyout boom that preceded the global financial crisis, the Wall Street Journal has said.

FIS declined comment. Barclays could not be reached for comment.

Action Item: Contact FIS: moreinfo@fisglobal.com

Photo of computer monitor showing data courtesy of SunGard Public Sector