Eugene Grygo, Chief Content Editor, FTF News
SunGard officials today quietly withdrew their bid to U.S. regulators for an initial public offering (IPO), according a report by the Reuters news agency. The IPO filing took place this past June and raised the hopes of investors and those current and former SunGard employees that would have benefited from a sexy IPO.
Of course, the reason for the withdrawal was that the financial products and services giant is bypassing an IPO and, regulators willing, will be owned by banking and payments technology provider Fidelity National Information Services (FIS), which will be acquiring the Wayne, Pa.-based company for $9.1 billion, including debt, FIS officials announced last week.
The agreement specifies that FIS will acquire 100 percent of the equity of SunGard, and that FIS will issue a combination of cash and stock valuing the company at “an unaffected enterprise value of $9.1 billion, including the assumption of SunGard debt, which FIS expects to refinance,” FIS officials say. The combined FIS and SunGard is expected to yield more than $9 billion in annual revenues.
At the same time, the backers of SunGard’s dramatic, headline-grabbing leveraged buyout in 2005 have reason to celebrate — modestly.
The New York Times and The Wall Street Journal report that the private equity firms — Bain Capital, the Blackstone Group, the private equity division of Goldman Sachs, Kohlberg Kravis Roberts, Providence Equity Partners, Silver Lake and TPG Capital — that were part of the now-very significant leveraged buyout of SunGard a decade ago will make 1.5 to 1.6 times their nearly $11 billion in total investment, according to industry sources.
The return for the seven sisters of sorts follows the sell-offs of the disaster recovery and the education businesses, and executive and personnel shuffles at SunGard — all part of the plan to keep and then IPO the universe of financial services and systems businesses that is SunGard Data Systems.
In my opinion, SunGard will always be the poster child of multiple acquisitions and mergers and it will likely serve as a case study for decades for business students and professors mining the intricacies of M&As, LBOs and private equity deal-making.
But SunGard’s financial services customers must be wondering if the acquisition rather than an IPO is a good thing for the vendor and its myriad offerings.
“From what I’ve read about the IPO, it was intended to raise some $7 billion,” says John Needham, founder and president of derivatives trading consultancy Needham Consulting and SunGard observer. “This sale price of $9 billion is a premium … so in that regard it makes sense.”
Does the acquisition ultimately give FIS up-sell opportunities?
“Oh, I think it certainly does,” Needham says. “SunGard has many premium financial services clients, and has some talented financial services and technical professionals, too. I think FIS will be happy it added SunGard.”
So, on the surface, SunGard customers should be able to embrace the FIS acquisition as it appears to be a fair and reasoned alternative to a flashy IPO.
Yet the acquisition has a strangely low-key, anticlimactic feel about it — sort of like the confused happiness in the morning after a Las Vegas wedding that may have a chance.
Sometimes the lack of certainty is a sign that things just might be for the best.
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