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Vista to buy DH Corp for US$2.03b

[NEW YORK] Vista Equity Partners LLC agreed to buy DH Corp in a deal that values the Canadian financial services provider at about C$2.73 billion (S$2.86 billion), aiming to create a financial technology powerhouse by combining it with Misys Ltd.

The C$25.50-a-share cash offer announced Monday is an 11 per cent premium above DH Corp's closing price Friday of C$23.04 a share, and 36 percent above where shares closed on Dec 5, before reports that the company was exploring strategic alternatives. Including debt, the transaction for the Toronto-based company is valued at C$4.8 billion.

The takeover underscores a series of purchases intended to help DH Corp pivot into a financial technology firm as demand for its traditional check-printing services declined. In 2015, DH Corp agreed to buy payment-technology provider Fundtech Ltd for US$1.25 billion as part of that effort. The company was founded in 1875 as Davis + Henderson.

Vista is paying about 15.5 times DH Corp's trailing 12-month earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. That's in line with similar deals in the industry, including Vista's 2016 acquisition of software maker Solera Holdings Inc for $6.5 billion including debt.

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DH Corp shares rose 9 per cent to C$25.12 in Toronto at 11:30 am after earlier gaining as much as 9.2 per cent.

Shares of DH Corp have fallen 37 per cent in the year through Friday, as the decline in its check-making business accelerated faster than anticipated. The company's services are used by 8,000 banks, specialty lenders, credit unions, governments and corporations, according to its website. It has more than 5,500 employees worldwide, with revenue of almost C$1.7 billion in 2016.

Vista, which has offices in Austin, Texas, Chicago and San Francisco, focuses on software and technology investments. It pulled the planned initial public offering of Misys in October, citing market conditions. Vista took Misys private in 2012 for 1.3 billion pounds ($1.6 billion).

The deal brings the total value of private equity transactions involving Canadian targets this year to about US$3.5 billion, slightly above the US$3.1 billion announced during the same period in 2016, according to data compiled by Bloomberg.

Morgan Stanley, Barclays Plc and Citigroup Inc advised Vista on the transaction, with Kirkland & Ellis and Goodmans providing legal advice. DH Corp worked with Credit Suisse Group AG and Royal Bank of Canada, and received legal counsel from Stikeman Elliott and Cravath Swaine & Moore.