There are strong rumours out of the US that activist investors are forcing ACI Worldwide to put itself up for sale or consider other strategic options, according to bankers and private-equity executives familiar with the situation.
ACI has apparently signed with Goldman Sachs to advise on its options, the bankers said. Goldman is expected to begin contacting potential bidders very soon.
In early December, Starboard Value pressed ACI to explore a sale. This came after Starboard disclosed in October that it had accumulated a 9% stake in ACI, up from 2% at the end of June. Starboard is known for buying stakes in companies and pushing management and boards for changes.
Executives for ACI, Starboard, and Goldman declined to comment.
Founded in 1975, ACI provides payment software and services to financial institutions, retailers, billers, and payment processors. It is the former Applied Communications Inc. and went public in 1995. The company, which employs about 4,000 people, generated more than $1.26 billion in 2019 revenue. Its market capitalisation is over $4.5 billion.
A sale of ACI is expected to attract strategic interest from potential buyers like Fidelity National Information Services (FIS), Fiserv, Finastra and Mastercard, as well as private-equity firms.
Peter Heckmann, a senior research analyst at D.A. Davidson, said ACI could sell for $39 to $51 a share, for an enterprise value of $4.75 billion to $6.26 billion, according to a December 9 analyst note. Large enterprise software players like IBM, Oracle, or SAP could also be interested in ACI’s software, Heckmann said.
A sale would bring more value to shareholders than the company’s stand-alone plan, which includes transitioning to a subscription model, according to a December 2 letter from Jeff Smith, Starboard’s managing member, to ACI Chairman David Poe and CEO Odilon Almeida.
“Before embarking on a transition that could last a decade, we believe the Board must concurrently explore all available strategic alternatives to maximise value, including a sale of the Company. ACI has tremendous value, but it may not be appreciated in the public markets if organic growth rates do not significantly exceed guidance,” Smith said.
In 2019, ACI was reportedly approached by several strategic buyers and private-equity firms that were interested in acquiring the company at a substantial premium, Smith said. ACI’s board is believed to have chosen not to conduct a sales process because they thought there was more value for shareholders by remaining public than selling, Smith said.
He noted that ACI’s shares at the time had dropped as much as 45% from their annual high of $37.89 in 2019. ACI’s shares have since rebounded, closing Wednesday at $38.63. Smith said at the time that he expected ACI to retain advisors and conduct a “full and fair sales process.”