From Israeli Globes Magazine:
Fundtech Acquires Division of CheckFree for $18 Mln Cash
By Ami Ginsburg
Just a month and a bit after raising $31 million on Wall Street in its first share issue, Fundtech has already joined Wall Street's mergers and acquisitions party. The company yesterday announced the acquisition of CheckFree Corporation's Internet banking division for $18.25 million cash.
The division Fundtech bought has 69 employees, and its revenue last year was $9 million, almost all from products in the Internet banking area. The division is considered highly profitable, and it made a net profit of more than $2.5 million. After the acquisition, Fundtech will be left with $17 million in its kitty.
CheckFree is a public company traded at a value of $1.5 billion. The link between Fundtech and CheckFree was formed last year, when the latter failed in its attempt to develop an independent product for interbank transfers, and preferred instead to market Fundtech's product to its customers. CheckFree sold the product to 45 banks, and at the same time devoted itself to developing a new Internet banking product line, aimed at enabling a bank's customers to communicate with it via the Internet. The company has 70 Internet banking customers.
Fundtech's CEO Reuven Ben-Menachem said: "This acquisition is key to Fundtech's strategy of focusing on the payment cycle, where our software products electronically connect parties' transferring funds to banks and treasury managers to banks. Fundtech is fully committed to carrying the existing products forward while building the next generation of Internet-based cash management products." The acquisition includes CheckFree's marketing channels, and access to other customers, as well as the company's development group located in Atlanta.
Fundtech Ltd. designs, develops, markets and supports a suite of client/server software products which enable financial institutions and large business enterprises to electronically process payments, transfer funds and manage their cash positions. The Internet banking product line, partly developed by Fundtech itself, brings bank customers into the picture, and enables banks to provide their customers more services via the Internet.
Ben Menachem said the CheckFree division being acquired had nearly 70 customers for the Internet banking products, including the Bank of Tokyo and Mistubishi Bank, which are among the largest banks in the world. In Israel, Fundtech is involved in a trial with Discount Bank for operating bank services via the Internet, and it intends exploiting its developments in this area for products for banks overseas.
According to Ben Menachem, Fundtech is considered a leader in the money transfer field, in which, apart from itself, a number of smaller companies are active. Following the acquisition, Fundtech will have about 160 employees in Israel and the USA.
Internet banking, which is linked to electronic commerce, has been considered one of the hottest fields on Wall Street recently. Companies in this field, or which base their sales on the Internet, have been very highly priced. This is apparently one reason for Fundtech's high market value. The company is currently traded at a market value of $220 million.
Today, Fundtech published its first quarter results. Revenue increased 243% to $3,028,000 from $882,000 in the first quarter a year ago. The gross profit for the first quarter 1998 was $2,390,000, or 79% of revenue, up from $528,000 or 60% in the first quarter of 1997. The company ended 1997 with revenue of $8 million, and a net profit of $636,000.
Reuven Ben-Menachem commented: "This quarter, our first quarter as a public company, showed significant growth for Fundtech and solidifies our position as a leading vendor in the funds transfer systems market. We are positioning ourselves for the future by opening new channels of distribution, while developing and acquiring new product offerings that meet our customers' needs."
Published by Israel's Business Arena on April 21, 1998 |
