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Jax Daily Record Monday, Sep. 21, 201512:00 PM EST

FIS and SunGard talks covered 19 months

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by: Mark Basch Contributing Writer

As two businesses that provide technology for financial companies, Fidelity National Information Services Inc. and SunGard started discussions in January 2014 about how the two companies “could potentially work together commercially.”

However, according to a Securities and Exchange Commission filing by Fidelity National Information Services, or FIS, it was another 16 months before the companies began talking about an actual merger.

Three months after that, Jacksonville-based FIS finally agreed to buy SunGard in a $9.1 billion deal.

The prospectus filed by FIS shows that Pennsylvania-based SunGard began getting inquiries from several potential acquirers in November 2014 as FIS and SunGard were still just considering the possibility of “working together.”

As talks progressed, in May 2015 FIS Executive Vice President Rob Heyvaert “also raised the prospect of the potential benefits of a combination between SunGard and FIS.”

Three days later, SunGard’s board of directors met to begin the process of an initial public offering, even as FIS and several other unnamed companies were talking to SunGard about a potential buyout.

The buyout negotiations and IPO process at SunGard continued simultaneously through the spring and early summer. FIS sent SunGard an “indication of interest” to buy the company on June 3 and just one day later, SunGard filed its registration statement for the IPO with the SEC.

Nobody was keeping any secrets through the process. “Later that day (June 4), there were press reports that there had been expressions of interest in acquiring SunGard, including from FIS,” the FIS prospectus said.

With other companies interested, FIS and SunGard agreed July 15 to negotiate exclusively for 30 days, but SunGard also continued with the IPO process. On July 31, it held a so-called “road show” for analysts in New York who might cover an independent SunGard after an IPO.

However, news of the exclusive talks between FIS and SunGard had leaked out to the financial press in New York. That had a tangible impact on the merger negotiations, as FIS’ stock rose on July 30 after Bloomberg News reported the talks.

So the companies agreed to use the average price of FIS’ stock for the five trading days before July 30 in their negotiations.

The agreement announced Aug. 12 calls for FIS to pay about $2.9 billion in cash and issue about 44.7 million shares of its stock to SunGard’s stockholders, which consist mainly of private equity firms.

The former SunGard stockholders will end up owning 13 percent of FIS once the merger is completed, which is expected in the fourth quarter.

FIS also is assuming SunGard debt that will make the total value of the deal $9.1 billion.

According to the prospectus, the two companies combined produced revenue of $4.5 billion and net income of $231 million in the first half of this year.

Dick’s Wings revenue jumps

ARC Group Inc., operator of the Dick’s Wings restaurant chain, reported a big increase in second-quarter revenue, according to its quarterly report filed with the SEC.

Revenue jumped 78 percent for the quarter to $244,990. The company attributed the increase to increased sales by franchisees at existing restaurants and sales by franchisees at new restaurants that opened during the past year.

ARC Group currently has 15 Dick’s Wings restaurants in Florida and four in Georgia.

With the increase in revenue, ARC Group reported net income of $40,398, or 1 cent a share, in the quarter, reversing a loss in the second quarter of 2014.

The company’s earnings were also helped by $7,330 in income from its 50 percent interest in another chain called Paradise on Wings. That investment produced a small loss in the second quarter of 2014.

APR completes Libya pullout

After its stock fell to new lows in early September, APR Energy plc’s stock more than doubled in price after it announced it had finally removed its remaining assets in Libya.

Jacksonville-based APR builds interim power plants around the world and has taken a severe financial hit in recent months because of write-offs related to projects in risky countries such as Libya.

APR reported an adjusted net loss of $40.3 million in the first half of this year.

APR’s stock, which trades on the London Stock Exchange, fell as low as 49.98 pence on Sept. 3 but rebounded to a high of 123.65p (about $1.91) on Sept. 11 after announcing the completion of its demobilization in Libya.

However, the stock has a long way to go as it traded near 1,000p two years ago.

APR said in a news release that its final shipment from Libya consisted of four mobile turbines, transformers, balance-of-plant equipment and spare parts.

“We now are focused on redeploying these assets to new opportunities in our pipeline and building on the initial success we have had in placing some of this equipment in a new plant in Botswana and an expansion of our Senegal project,” CEO Laurence Anderson said in the news release.

Analyst rates Black Knight at ‘perform’

Oppenheimer & Co. analyst Glenn Greene last week initiated coverage of Jacksonville-based Black Knight Financial Services Inc. with a “perform” rating, the equivalent of a “neutral” rating.

Like other analysts who have begun coverage of the company since it was spun off from Fidelity National Financial Inc. in May, Greene is impressed with Black Knight’s business.

“We are highly attracted to Black Knight’s strong market position as a provider of outsourced mortgage processing services,” Greene said in his report.

Black Knight’s mortgage servicing platform processes about 58 percent of all U.S. mortgage loans and is “a unique ‘crown jewel’ type of asset and drives most of the company’s value, in our opinion,” he said.

However, Black Knight’s stock has already jumped higher from its May IPO price of $24.50, trading near $35 last week.

“We believe that Black Knight’s valuation appropriately considers the company’s attractive near- and long-term growth prospects and its strong profitability profile. Accordingly, we initiate coverage of Black Knight with a Perform rating as we await a better entry point,” Greene said.

Jacksonville-based Black Knight evolved from Lender Processing Services Inc., a company that was spun off from Fidelity but then reacquired in January 2014. While it seems like Black Knight and LPS are the same company, Greene, who had covered LPS when it was a public company, pointed out a key difference in his report.

“Black Knight, in our view, largely reflects a repositioned company that includes the strongest assets from LPS with the best growth and profitability prospects,” he said.

“Conversely, the more volatile cyclical and counter-cyclical transaction-oriented origination and default services business from the former LPS were transferred to FNF’s ServiceLink business and are not part of Black Knight. Accordingly, while Black Knight’s primary market is the mortgage industry, its services are largely recurring and non-cyclical,” he said.

Medtronic still mum on merger impact

Medtronic plc completed its big merger with Ireland-based Covidien plc in January, but the company still isn’t saying if the merger will have an impact on its Jacksonville operations.

Medtronic located its corporate headquarters in Dublin after the merger while maintaining operational headquarters in Minneapolis. The headquarters for Medtronic’s surgical technologies division has been in Jacksonville.

Spokesman Fernando Vivanco said by email last week that the company doesn’t have any news to report on its post-merger plans for the surgical technologies division, as Medtronic reported earnings for the first quarter ended July 31.

The surgical technologies division performed well in the quarter, growing revenue by an adjusted 15 percent to $420 million.

Medtronic’s total revenue rose 12 percent to $7.3 billion in the quarter.

Reports say Deutsche Bank planning big global cuts

While Deutsche Bank has plans to grow its Jacksonville operations, the Germany-based banking company is looking to cut 25 percent of its global workforce, according to news reports last week.

Several financial news organizations, including Bloomberg News and Reuters, said the company has discussed cutting its overall employment from about 99,000 to 75,000. The reports cited unidentified sources.

Deutsche Bank opened its Jacksonville operations center in 2008 and has grown it to about 1,700 employees. The company said in an application for city and state incentives in July that it plans to add more jobs to bring total employment to 2,124 by the end of 2017.

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