"We sought a strategic partner, not to sell the company. Chairman Avi Fischer and I love the company, and we want to promote it, Fundtech Ltd. (Nasdaq: FNDT; TASE: FNDT) founder and CEO Reuven Ben-Menachem told "Globes" in an exclusive interview following its merger with S1 Corporation (Nasdaq: SONE) of the US.
Fundtech, a provider of automated clearance, processing, and payment solutions for financial institutions, will merge with S1 at a company value of $310 million. The two companies, which are in the same business, know each other well. S1 tried to acquire Fundtech in 2003, and Fundtech tried to acquire S1 in 2006. Nothing came of those attempts, but a deal was reached in the third time at bat, after a month of negotiations, as "Globes" was the first to report.
"The feeling is great," said Ben-Menachem. "This time, the conditions were right for the companies to merge. We understood that customers need to work with large vendors with full product lines. We felt it proper to take the two companies to build something stronger with a full range of products covering the entire banking transaction field."
Other companies were interested in Fundtech during the negotiations with S1, including software giants such as Oracle Corporation (Nasdaq: ORCL). "We wanted a deal that would keep us in business. It's true that other parties approached us, but we weren’t their core business. We don’t see this as an exit, but as the start of building a great company," said Ben-Menachem.
The merged company will bear Fundtech's name, and it will likely continue to expand. "We don’t intent to sit back. We'll look at other acquisitions as well as a buyback to create value for investors," he said.
Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH) holding company Clal Industries and Investments Ltd. (TASE: CII) owns 58.6% of Fundtech, and it will be the largest shareholder in the merged company. Fisher is the co-CEO of Clal Industries.
Ben-Menachem said, "Since the beginning of the year, Avi and I discussed the need for a strategic change that would put the company in a new league. We sought larger deals, but we changed our minds that that was what we had to do."
Fisher will vacate his position in the merged company in favor of Ben Menachem who will become executive chairman, and S1 CEO Johann Dreyer will become CEO of the merged company.
"Globes": After 18 years as CEO, won't it feel strange to leave the job?
Ben-Menachem: "I'll continue to take an active role in daily operations, so I see no great difference. I've been asked if I'll retire. I have no plans to retire, but to build something great."
So you'll share the work with Dreyer? You're not worried about friction?
"I'll manage the international operations, except for North and South America. I've known Dreyer for over six years. I think that he's very focused on the job and less on himself, and I try to be the same. That's why I think that we'll work very well together. The executives of both companies know each other from the companies' complementary and rival operations, and there was always great respect for each other."
Although S1 has a larger market cap than Fundtech, Fundtech is more profitable and Ben-Menachem does not fear the future. "S1's profits fell last year, but together, we'll achieve higher profitability through synergy."
Does this synergy include layoffs?
"That really isn't the intent. There are two kinds of synergy in the deal. In sales, we'll offer a joint basket of products and each company will develop new markets. On the expenses side, the synergy comes from the fact that both companies are public companies and there is no need for two boards of directors, and will save on insurance costs and on the data center. As for the employees, I only see growth, not reductions. The joint company has great potential, and I believe that we'll grow fast."
Fundtech's share price rose a further 0.5% on Nasdaq yesterday to $19.92, giving a market cap of $312 million, and rose 1% by midday on the TASE today to NIS 68.20.
Published by Globes [online], Israel business news - www.globes-online.com - on June 30, 2011
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