Misys rises as third parties show interest, Temenos merger at risk

Shares in FTSE 250 software firm Misys were up 5% on Tuesday afternoon on the back of speculation that the firm could abandon a merger with Switzerland-based peer Temenos if other offers prove more attractive to shareholders.

According to Bloomberg, which cites two unnamed people close to the matter, Misys has attracted interest from buyout firms but has not yet received firm offers. However, if these other parties are indeed interested, they'd better be quick as the company gave March 6th as the deadline for an alternative offer (in accordance with Rule 2.6 [a] of the 'Takeover Code').

By 15:36 today, shares were up 4.75% at 304.1p.

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Misys, which confirmed on February 3rd that it was in preliminary discussions with Temenos regarding a "possible strategic combination", announced a few days later that it had reached agreement in principle on certain key items relating to a possible all-share merger of the two companies.

"Misys and Temenos believe that the combination would create one of the leading companies in the financial services software industry with the prospects for long term growth underpinned by increasing demand amongst financial institutions for improved efficiency and customer service," Misys said on February 7th.

The company has since announced that its Chief Executive Officer (CEO), Mike Lawrie, would leave at the end of March after having received an offer of employment from a third party, following five and a half years with the company. Tom Kilroy from the general counsel is now the acting CEO "to lead the company both through the CEO transition and the ongoing negotiations with Temenos."

Under the possible tie-up between Misys and Temenos, the latter's CEO would step in to act as the head of the combined group, while Stephen Wilson, currently Misys's Chief Financial Officer, would maintain that role in the new entity.

Merchant Securities reiterated its sell recommendation for Misys on February 3rd after the firm first confirmed the merger speculation, saying that the potential combination is "borne out of increasing risk to consensus second half estimates."

"Our investment thesis remains that Misys is reliant on continual M&A activity, with questionable returns for the deals of the past, to cover for abject organic performance," Merchant analyst Roger Phillips said.

BC