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Strategic investors often up their stakes during bear markets, when their large investments get the most "bang for the buck."
The story indiates that the five institutions are Zurich Financial Services , Allianz AG Holding , FleetBoston Financial Corp. (NYSE: FBF), J.P. Morgan & Co. Inc. (NYSE: JPM) and a unit of State Farm Insurance.
The press release states that: "Under the terms of the agreements, S1 will issue US$244 million in shares of newly authorized series D convertible preferred stock. The series D convertible preferred stock votes with S1's common stock, and has no preferential dividend or liquidation rights. In total, the preferred stock is convertible into an aggregate of 7,145,052 shares of S1 common stock at the option of the holder or upon the occurrence of certain events, subject to customary adjustments at an effective price of $34.15 per share. "
State Farm has been an investor for some time, and was earlier reported to have wanted to increase its stake. Zurich has been a strategic partner of S1 for some time, joint venturing on an European system for online financial services, if memory serves. Allianz, like State Farm, may be looking to expand its online insurance and financial services through S1 facilities, and may want to participate in the chances of success going forward.
Overall, this looks to me not as a "need for cash" situation for S1, but an extension of its existing network of strategic alliances, adding global insurance players to its existing network of banking players. And those players making their investment during a period in which the equity markets are priced more favorably for them.
Perhaps someone else has a different perspective.
Doug (no position in any of the companies mentioned) |
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