U.S. private equity firm Vista Equity Partners said on Monday it would buy Canadian financial technology services provider DH Corp in a deal valued at $4.8 billion (US$3.6 billion).
Fintechs, or companies that use technology to revamp everything from banking to fraud security, globally draw billions in investment annually.
Private equity firms as well as major financial institutions have invested in fintechs in the expectation that new innovations will transform the financial services industry in decades to come.
Venture capital-backed investment in Canadian financial technology companies hit its highest level in almost two decades last year, even as the flow of funds into major fintech markets like the United States declined, according to sector data.
Vista offered $25.50 in cash for each DH Corp share, an 11 percent premium to the stock’s Friday close.
Vista said it would combine DH with one of its portfolio companies, U.K.-based Misys, a software provider for retail and corporate banking, lending, treasury and capital markets.
The deal will create a company with about US$2.2 billion in revenue and over 9,000 customers across 130 countries, Vista said.
The acquisition follows DH’s appointment of a special committee in December to assess expressions of interest to buy the company.
Formerly Davis + Henderson Corp, Toronto-based DH has transformed itself from a check printing company into a provider of payment and lending services. Its customers include banks and credit unions.
DH has close to 8,000 customers, including Canada’s five biggest lenders and more than half of the world’s 50 largest banks. Nearly 60 percent of its $1.5 billion in annual revenue comes from outside the United States.
DH shares, which dropped to a record low last November, have since risen over 64 percent in anticipation of an acquisition.
Credit Suisse and RBC Capital Markets are financial advisers to DH, while Stikeman Elliott LLP and Cravath, Swaine & Moore LLP provided legal counsel.
Morgan Stanley, Barclays and Citi are financial advisers to Vista. Kirkland & Ellis LLP and Goodmans LLP provided legal counsel.
Update: The Financial Times reported last week that Vista-backed Misys was competing against Advent International to buy DH Corp.
In January, Reuters reported Canada Pension Plan Investment Board and several U.S. private equity firms were also interested in acquiring the company.
(Reporting by Ahmed Farhatha in Bengaluru; Editing by Savio D’Souza and Sai Sachin Ravikumar)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters/Mark Blinch