DH CORP. GOING PRIVATE FOR $2.7B

Chequemaker turned fintech to be merged with U.K. firm

TORONTO • Canadian financial technology provider DH Corp. has entered into an agreement to be acquired by Texas-based Vista Equity Partners for roughly $2.7 billion, the companies announced Monday.

The U.S. investment firm intends to combine DH with a company from its portfolio, Misys, a U.K.-based financial services software provider. The transaction, if successful, will create a fintech company with nearly $3 billion in revenues, 10,000 employees and customers across 130 countries (including 48 out of the Top 50 global banks), the firms said in a joint release.

“After a comprehensive review of strategic alternatives, the Special Committee of Independent Directors and our Board have unanimously concluded that this agreement is in the best interests of the Company and our stakeholders,” said DH Corp.’s chairman of the board Paul Damp in a statement.

Vista will acquire all the outstanding shares of the Toronto-based chequemaker turned financialtechnology firm for $25.50 per share in cash and the assumption of DH Corp.’s debt obligations, including convertible debt.

That works out to $2.723 billion based on the number of outstanding shares (as compiled by Bloomberg), but the companies say with the debt obligations the deal has a total enterprise value of $4.8 billion.

Shares of DH Corp. closed at $25.16 in Toronto on Monday, up 9.2 per cent.

The valuation looks “fair,” Canaccord Genuity analyst Kevin Wright said.

“This seems to follow the trend for acquiring Canadian technology companies at fair but not stratospheric multiples ... Though another bidder could emerge we expect that the company has considered the alternatives so this may prove unlikely,” he said in a note to clients downgrading DH Corp. from buy to hold.

Monday’s announcement comes roughly three months after DH Corp. said it formed a committee to evaluate acquisition inquiries from other firms.

Other companies that were reportedly interested include the Canada Pension Plan Investment Board and U.S. private equity firms TPG, Cerberus Capital Management LP and Thoma Bravo, Reuters previously reported.

DH Corp is used by nearly 8,000 banks, governments and other entities, and has 5,500 employees and $1.6 billion in revenues.

Formerly called Davis + Henderson Corp., the company pushed to transform itself from a cheque printing company into a provider of global payments, lending and financial solutions, in part via acquisitions.

DH shares rose to a high of $43.10 in July, 2015. From there, the stock began to slip and on Oct. 26, 2015 — when hedge fund Lawton Park Capital Management accused DH of masking weak performance with “desperate M&A and accounting tricks” — its shares plunged 43 per cent to $16.25. DH disputed the allegations, but its shares never fully recovered.

At $25.50 the take-out price is a 33-per-cent premium to DH Corp.’s closing price of $19.19 on Dec. 6, the day before it announced it was exploring potential acquisition interests, said Wayne Johnson, an analyst with Raymond James.

The price also represents an 11-per-cent premium to DH’s closing price Friday, but is still a discount compared to its peers, he said in a note downgrading the company from outperform 2 to market perform 3.

“We believe this discount is warranted given the company’s recent uneven performance,” Johnson said.

The completion of the deal is subject to court and shareholder approval. It is expected to close prior to the end of the third quarter.

“The combination of our two companies creates significant opportunity for our customers, our employees and our partners,” said Nadeem Syed, CEO of Misys, in a statement.

“By coming together, we have the opportunity to create a global FinTech leader, positioning us to lead the corporate banking software space, accelerate our cloudbased offerings, and expand our footprint in North America.”