How did the Chicago PE firm accomplish this? Today, GTCR offered to buy Fundtech for about $400 million, or $23.33 a share cash. At $23.33, the offer is a near 33% premium to Fundtech’s closing share price Wednesday. GTCR said it plans to combine Fundtech, a provider of transaction banking software and services, with portfolio company BankServ.
Fundtech already has a merger agreement on the table. In June, S1 inked a deal to buy Fundtech, offering 2.27 shares of S1 stock for every Fundtech share. The deal, which was all stock, was reportedly valued at about $320 million at the time of the announcement.
But it gets more complicated. S1, a payments provider from Norcross, Ga., is also facing a hostile offer from ACI.
GTCR’s proposal has nothing to do with ACI and everything to do with Fundtech. Today, Fundtech says it’s ending its deal with S1 and they, S1, have 5 business days to make a better offer. S1, in its own statement today, says it’s reviewing its options.
If S1 doesn’t come in with a superior bid, Fundtech’s agreement with S1 will terminate. Fundtech will then accept the bid from GTCR, says Collin Roche, a principal.
“We think we have delivered a compelling value and a compelling deal for shareholders,” Roche says.
Royal Bank of Canada, BMO Capital Markets and Newstone Capital Partners are providing debt financing. The deal, if S1 doesn’t come in with a better offer, is expected to close with GTCR in fourth quarter. GTCR, a Chicago PE firm, is making the investment from its most recent fund, which raised $3.25 billion earlier this year.
“GTCR’s extensive experience investing in payment processing and banking-related businesses makes them a strong partner to support the continued growth of Fundtech,” said Reuven Ben Menachem, Fundtech’s CEO, in a statement.
The combined company, which will be called Fundtech Inc., will have their headquarters at Fundtech’s offices in Jersey City, N.J. Menachem, Fundtech’s founder and CEO, will also serve as chief executive. David Kvederis, BankServ’s CEO, will be on the board.
GTCR is no stranger to financial technology. In July, the PE firm agreed to sell its stake in ConvergEx, a financial industry software company. GTCR also closed its buy of a BankServ, which provides SaaS banking and payments, in August.
In fact, it was BankServ that got GTCR interested Fundtech. As the buyout shop pursued BankServ over the past year, it developed a greater understanding of Fundtech’s business. GTCR realized it made sense to pursue them as well, Roche says. “Fundtech is really a complementary business to BankServ,” he says.
Fundtech didn’t have a go-shop to pursue superior offers, but their agreement with S1 does allow them to respond to inquiries, Roche says “This is not a hostile bid…Everything was done with the full support of the Fundtech board,” Roche says.
GTCR has also agreed to pay the $11.9 million termination fee to S1, Fundtech said in a statement.
Stuart Goldstein of Moelis & Co., along with P.A. Weiner, David Archibald and David Wirdnam of RBC Capital Markets and BMO Capital provided financial advice to GTCR. Citi advised Fundtech.