Internet-based financial services software vendor Security First Technologies Corp said Wednesday that it has amended the terms of its previously-announced acquisition of Belgium-based FICS Group NV. The deal for FICS, which provides electronic banking services and software, will now be worth as much as $556m, down from an estimated $1.08bn price tag when the acquisition was first announced in May.
The terms of the new agreement call for Security First to issue 10 million shares of its common stock, with up to an additional 4.5 million shares as an earn-out if FICS meets certain financial goals – including revenue targets for specified operating units of $89m for 2000 and $123m for 2001. In addition, Security First will exchange roughly 1.2 million of its options for the outstanding options held by FICS employees and will grant an additional 2.8 million options to FICS employees.
The original structure of the deal called for Security First to issue 20 million shares outright. Based upon Security First’s closing price of $35.75 on Tuesday, the value of the FICS transaction is roughly $395m. If the earn-out targets are reached, the price would then rise to about $556m, the company said.
Security First chief financial officer Robert Stockwell said about 20% of the overall decline in purchase price can be directly attributable to the general downturn in tech stocks over the past few months. Security First shares were trading at about $54 when the initial deal was announced.
The rest of the difference in the value of the deal stems from a somewhat disappointing performance by FICS. Stockwell said the company’s revenues were essentially flat in the first and second quarters, when Security First was expecting stronger growth. So, he says, the two parties sat down and worked out a new deal. FICS employees will be happier with the revised arrangement, however, as the number of stock options they will receive has more than doubled.
Terms call for Security First’s Belgian subsidiary to carry out the acquisition, which will be accounted for as a purchase and is expected to close in the fourth quarter of this year. The corporate headquarters for the new company – to be dubbed S1 Corp – will remain in Atlanta, with Brussels, Belgium acting as a major operational and development center. James Mahan, chief executive of Security First, will serve as CEO of S1, while Michel Akkermans, FICS’ founder, CEO and chairman, will serve as S1 chairman.
Separately, Security First said its deal to acquire Edify Corp – announced the same day as the FICS deal – has not been altered in any way and is progressing according to plan. That deal, currently valued at about $228m, is also due to close in the fourth quarter.
