Traders had started to wonder about whether a mooted bid for IT group Misys would ever happen, and they have now received the answer.
And it's no. US payment processor Fidelity Information Systems said it was no longer considering an offer for Misys, after the UK company rejected its overtures. Misys said it received a cash offer from FIS, but it believed this undervalued its business and it withdrew from further talks.
The news has sent Misys shares tumbling, down 64.6p to 293.5p, an 18% decline. Analyst Rajeev Bahl at Matrix said:
Given FIS's need to gear up to buy Misys (we estimate to 3.7 times net debt/EBITDA, at the limit of sector norms), potential synergies would have been key. Signs of weaker end-market demand (eg. Temenos' warning) will also have impacted potential exit value.
There are no other bidders for Misys at this stage, and we expect this process would have flushed out any other interest. As such, we expect Misys to return to trading ex any bid premium (the undisturbed price prior to media reports of a possible deal is 320p-330p).
Roger Phillips at Evolution Securities issued a sell note after the news:
Rumours suggested this bid occurred because Misys' banking division was being auctioned off. Whether this is true or not, it probably won't be long before M&A rumours start again around Misys, be it selling banking, buying Kondor from Thomson-Reuters, or something else. We think the "undisturbed price," pre-bid rumours was 300p-330p. However, concerns over Euro banking software mean a discount to this is now warranted.
But Julian Yates at Investec was more positive, repeating his buy recommendation:
We think the share price fall on the back of talks with FIS ending provides a good entry point. The 2011 results provided few surprises (upside or downside) with the fourth quarter licences softness (internal delivery related) in the treasury and capital business not impacting the bottom line, showing profits are being well managed. While it may seems a challenging time to turn positive on a financial services-exposed business, the resilience of the model was evidence in the previous cycle and we see further value enhancement ahead.
Source: http://www.guardian.co.uk/business/marketforceslive/2011/aug/04/misys-drops-as-bid-talks-end
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