×

UPDATE 2-Misys targets fund managers with $600mln Sophis buy

By Quentin Webb and Matt Scuffham LONDON, Nov 12 (Reuters) - Britain's Misys is buying Dublin-based Sophis for 375 million pound ($606 million) to boost its capital markets software business, adding more investor clients such as asset managers and hedge funds. The purchase, from private equity firm Advent International, will see Misys use its global reach to sell Sophis systems into high-growth Asian and Middle Eastern markets, and should boost Misys's earnings per share (EPS) by at least one-quarter. It comes five months after people familiar with the matter told Reuters that Advent, which has made a string of financial-technology investments, was preparing to sell Sophis. Misys is stronger in software relating to bonds, credit, foreign exchange, and interest-rate derivatives, and has a bigger "sellside" client base among investment banks and brokers, while Sophis focuses more on equity and equity derivatives and has more "buyside" investor clients. Jefferies analyst Milan Radia said Sophis represented "a compelling acquisition" for Misys. "Together, they create a heavyweight market leader" in the treasury and capital markets (TCM) software business, Radia wrote in a note to clients. The deal values Sophis's equity at 235 million pounds, with net debt of 140 million, Misys said in a statement on Friday. It may also make earn-out payments of a further 4 million pounds. Sophis's portfolio and risk-management software helps with tasks such as calculating the "Value-At-Risk" (VAR) in a portfolio. Its "Value" system is used by more than 80 investment managers, and clients range from France's AXA SA to Elliott Advisors, the UK arm of Paul Singer's hedge fund Elliott Management. Misys is funding the deal by arranging 280 million pounds of new loans that benefit from lower borrowing costs; selling part of its remaining stake in U.S. healthcare specialist Allscripts ; and issuing a 100 million pound convertible bond. EARNINGS BOOST Advent, which took a majority stake in the family owned firm in 2007, also discussed a possible sale with rival buyout funds, two people familiar with the matter said. However, the auction focused mostly on trade rivals in Europe and the United States who would be able to benefit from significant cost and revenue synergies, they added. Sophis made earnings before interest and tax of 30 million euros last year, on revenues of 74 million. That means the deal values it at about 14.5 times EBIT, or 5.9 times sales. Misys Chief Executive Mike Lawrie told analysts the deal would boost EPS by 25 to 30 percent in the year to end-May 2012, the first financial year after it closes. Misys expects the deal, which requires shareholder approval, to close by end-February. Misys also said on Friday it would return proceeds of 670 million pounds to shareholders from the sale of the other 90 percent of its stake in Allscripts in August, through a tender offer priced between 270 and 310 pence per share. That represents a discount of 8.6 percent to Misys closing price of 295.5 pence on Nov 11 and the upper end represents a premium of 4.9 percent. Shares in Misys were down 1.1 percent to 292.1 pence at 1253 GMT. Credit Suisse advised Advent and JPMorgan advised Misys. (Editing by Mike Nesbit) ($1=.6192 Pounds) Keywords: MISYS/ (Reuters messaging: quentin.webb.thomsonreuters.com@reuters.net; +44 207 542 9405) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.