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The heated rivalry between payment-software firms S1 Corp. and ACI Worldwide Inc. for the loyalty of S1’s shareholders took on yet more urgency on Monday as S1 urged owners of its shares to reject an offer from ACI.
In a letter to shareholders seeking proxies in support of a proposed $700 million merger with Fundtech Ltd., Atlanta-based S1 said ACI’s $540 million bid, if successful, would destroy shareholder value, alienate clients, and run the risk of governmental scrutiny on antitrust grounds. S1’s filing of proxy materials with the Securities & Exchange Commission follows by one week a similar move by Elkhorn, Neb.-based ACI, which is urging S1 shareholders to reject the S1-Fundtech combination. A shareholder vote on that deal is set for Sept. 22. In its letter, S1 management asks shareholders to vote for the Fundtech merger by returning a white proxy card, while disregarding a blue card sent by ACI.
While arguing that the merger with Jersey City, N.J.-based Fundtech will enhance value, add omplementary geographic markets, and reduce costs, S1 alleges that a combination with ACI would drive away clients. “It is critical for you to know that numerous customers and prospects of S1 have — unsolicited — voiced strong opposition against an S1/ACI combination,” the S1 letter tells shareholders, warning them of a risk of “near- and long-term destruction” of shareholder value. The letter also warns that a deal with ACI could invite antitrust scrutiny. The two companies offer many of the same product lines. An antitrust investigation could end up scuttling the deal, the letter warns, leaving S1 with only a $21.5 million termination fee. “This fee would only cover a small fraction of the damages we believe S1 would incur if the transaction ACI proposed does not close,” the letter says.
S1 management goes on to accuse ACI of trying to “derail” the deal with Fundtech because it fears a stronger competitor. S1’s growth in recent years has “come at ACI’s expense,” the letter asserts, adding that S1 has signed 22 of ACI’s clients since 2009. “Clearly, ACI fears a greater loss in business when facing an even stronger combined S1/Fundtech,” the letter says. An ACI spokesman told Digital Transactions News by e-mail that the company has no comment on S1's letter.
By becoming part of S1, wholesale-banking specialist Fundtech would gain access to S1’s base of business in processing software for consumer banks and retailers. A combination of S1 and ACI, by contrast, would bring together two companies with similar product lines, including systems for electronic funds transfer switches, merchants, and banks. ACI estimates that by acquiring S1 it would boost its market share in payments software from 5% to 8%. It would also gain a foothold with retailers outside North America, extend its reach in online banking globally, and pick up a new customer base among community banks.
