Siebel offers up to $150m for Eontec
$70m up front, more to follow
Siebel Systems is to acquire Irish company Eontec, allowing the banking software firm's founders and managers to cash in. Under the terms of the deal, announced late on Tuesday evening, the California-based company will pay $70m in cash to Eontec shareholders. As much as $60m more could be paid out in 2005, although Siebel said that it expects this figure to be closer to $30m. This secondary payout is dependent on Eontec hitting certain business targets.
The addition of Eontec to its business will shave about $0.01 off Siebel's second quarter earnings per share, which is still in line with earlier guidance of per share earnings between $0.06 and $0.08. These earnings per share figures exclude the impact of one-time charges relating to the buy, which could amount to between $3m and $7m, Siebel said.
Eontec's main business is Java-based banking software that is used by retail banks in branches, on-line and in call centres to give banks a complete view of any customer across all of its channels. Among other things, the technology helps banks cut down on fraud and allows them to roll out new products faster and easier.
Tom Siebel, Siebel Systems chairman and CEO, said the acquisition was "a winning one for the retail banking industry and its customers worldwide", and his firm pledged to continue to support Eontec customers. Wth the merger, Siebel will integrate Eontec's software into its own banking-focused products. Eontec software will replace outdated teller systems and and can be hooked up to Siebel's CRM (customer relationship management) and business intelligence tools.
It is currently unclear what will happen to Eontec's 150 staff, most of whom are based in Dublin. No Eontec spokespeople were available to comment on the deal, although Siebel said that all Eontec employees "who bring extensive expertise in developing and delivering multichannel retail banking solutions, will join Siebel's retail finance division".
Eontec's CEO, Patrick Brazel, who replaced former CEO and co-founder Jim Callan less than a year ago, has secured a new position in Siebel as head of the firm's retail finance division. Brazel is thought to own around 2.5m of Eontec's 38m shares, indicating that his payout as part of the buy could amount to $4.6m in the first tranche, and up to $3.9m more in 2005, depending on the firm's performance.
Eontec's complex share structure makes calculating exact cash payouts difficult, but it is certain that all of the company's major shareholders, including Brazel, Callan (who owns 6.7m shares) and North American chief Colin Piper (who owns about 1m shares) will take home sizeable cheques.
Eontec investors will also make some return on their investment. This list includes Island Capital, a funding vehicle owned by entrepreneur Denis O'Brien, as well as Warburg Pincus, which led a $25m Eontec funding round in 2001, and ICC Venture Capital, which led a $10.4m funding round in 2000.
The acquisition comes after a difficult few years for Eontec, which is thought to have hovered just below break-even after beginning a job-cutting campaign in late 2001 that eventually saw the firm cut about half of its workforce to its current 150 level. But despite any troubles, the company has put together an impressive customer list that includes Bank of Ireland, EDS, Commonwealth Bank in Australia and DBS Bank in Singapore.