Amdocs reaches deal to buy Architel
$330-million (U.S.) pact is the third major
U.S. acquisition of a Canadian firm this week
Thursday, March 4, 1999
MARK EVANS
Technology Reporter
Amdocs Ltd. has reached a deal to buy Architel Systems Corp. for about $330-million (U.S.),
making it the third major acquisition of a Canadian company by a U.S. suitor this week.
St. Louis-based Amdocs said yesterday that it plans to issue 0.95 shares for each Architel share.
The $21.08-a-share offer, $32.04 (Canadian), based on Amdocs closing price yesterday,
represents a 34-per-cent premium to Architel's closing stock price of $23.90 Tuesday before the
deal was announced.
The deal doesn't come as a big surprise because Murray Hill, N.J.-based Lucent Technologies Inc.,
which competes against Architel, bought Kenan Systems Corp. in January for $1.48-billion (U.S.).
Analysts expected Amdocs, which goes head-to-head with Kenan, to buy a telecommunications
software maker such as Architel to stay competitive.
Amdocs makes software used by telecommunications carriers to do billings and provide customer
service. Architel's technology is used to automate the management of customer orders, activate
services and manage network inventory.
"It's the right thing to do for both companies," said Doug Ashton, an analyst with Jefferies & Co.
in Boston. "It will accelerate both companies' growth rates and leave everyone else in the industry
gasping for air.
Mr. Ashton said he believes there was another bid on the table for Architel, which may explain
why Amdocs is willing to pay a hefty premium.
But it's unlikely another offer will surface because Anthony van Marken, Architel's president and
chief executive officer, and David Curry, a senior vice-president and co-founder, have agreed to
vote their shares in favour of the deal.
Toronto-based Architel has also granted an Amdocs unit an option to purchase another 1.5 million
common shares, which would become exercisable if the deal isn't completed. The shares owned by
Mr. van Marken and Mr. Curry and the stock option would give Amdocs a 19.9-per-cent stake in
Architel.
Architel's largest shareholder is Altamira Investment Services Inc., which amassed its 13-per-cent
stake for about $6 (Canadian) a share. Helix Investments (Canada) Ltd. owns a 5-per-cent interest.
Architel shares jumped $6.10 to $30 on the Toronto Stock Exchange yesterday after hitting a
record high of $34.50 earlier in the day. Amdocs fell $3.62 (U.S.) to $22.19 on the New York
Stock Exchange.
Amdocs' planned purchase of Architel reflects the growing trend of foreign companies taking
advantage of Canada's low dollar and modest stock valuations to hunt down bargains -- making
Canada the "Wal-Mart" of the acquisition world.
"That's a huge theme because [Canadian] stocks do trade at a huge discount," said Barry Richards,
an analyst with Sprott Securities Ltd.
This week alone, New York-based Polo Ralph Lauren Corp. bid $79-million (Canadian) for
Toronto-based Club Monaco Inc., while Hampton, N.H.-based General Chemical Group Inc.
agreed to buy Toronto-based Noma Industries Inc. for $330-million.
Amdocs' purchase of Architel will create a company with 3,600 employees and revenue of more
than $430-million (U.S.), based on their combined sales in fiscal 1998. Architel had revenue of
$50.8-million (Canadian) in the year ended Sept. 30, and employs 414 people. The company does
not expect layoffs.
Amdocs and Architel are enjoying strong revenue growth as telecommunication carriers seek ways
to streamline operations and improve service in an ultracompetitive market.
Amdocs' customers include Rogers Cantel Mobile Communications Inc. of Toronto and BellSouth
Corp. of Atlanta, while Architel's clients include Montreal-based BCE Mobile Communications Inc.
and, most recently, Britain's BT PLC.
Analysts said Architel's fate was sealed in January after it beat out Lucent to supply software to
BT. The contract reflected Architel's strong technology and its growth prospects in Europe.
Avinoam Naor, president and CEO with Amdocs Management Ltd., said Lucent's purchase of
Kenan, which competes against Amdocs, didn't prompt its decision to acquire Architel.
"Our move here is not defensive, it's offensive," he said, adding that Amdocs believes that Kenan
will be less of a threat because Lucent is more focused on selling telecommunications equipment
than offering software and services.
Mr. Naor said Architel will operate as a division of Amdocs with headquarters in Toronto and he
expects more jobs to be created in Canada.
TECHNOLOGY TAKEOVER
Amdocs
Chairman: Bruce Anderson
NYSE symbol: DOX
Head office: St. Louis, Mo.
Operations: Provides product-driven information system solutions to major telecommunications
companies around the world, integrated customer care and billing systems for wireless and wireline
network operators as well as for companies that offer multiple service packages.
Architel Systems
Chairman, president and CEO: Anthony van Marken
TSE symbol: ASY
Head office: Toronto
Operations: Develops, markets and supports operations support systems to the global
telecommunications industry. Their principal product, "Automation Services Activation program,"
is used by telecommunications service providers. Other products include work force management
software and craft access software.
Source: Datastream and Bloomberg Financial Services |
