SS&C Technologies Holdings Inc. (NASDAQ: SSNC) announced on Thursday it will acquire DST Systems Inc. (NYSE: DST) to expand its footprint in financial technology software through its largest deal to date.
Under the terms of the agreement, SS&C will purchase DST in an all-cash transaction for $84 per share plus assumption of debt, representing a premium of 29 percent to the stocks close on Tuesday and equating to an enterprise value of approximately $5.4 billion.
The report sent DST’s shares surging nearly 23 percent on Wednesday, while SS&C’s closed up 12.8 percent. Both stocks jumped to record highs on Thursday, before easing to trade up about 5 percent each.
“SS&C has a long track record of acquiring underperforming businesses, reducing cost, and increasing efficiency to bring performance more closely in line with its average margins,” Morgan Stanley analyst Brian Essex said in a client note.
DST is a global provider of specialized technology, strategic advisory and business operations outsourcing to the financial services and healthcare industries. Headquartered in Kansas City, Missouri, with more than 14,400 employees worldwide, DST generated pro forma revenue of $2.3 billion for the 12 months ended September 30, 2017.
The transaction significantly increases SS&C's scale, with approximately $3.9 billion in combined pro forma revenue and 13,000 clients. Additionally, the transaction expands SS&C's footprint into the US retirement and wealth management markets and adds 110+ million investor positions across DST's client base. The combination leverages SS&C's market leading software platform for institutional and alternative asset managers to drive increased automation and efficiency across wealth management account servicing.
SS&C said it plans to fund the acquisition and refinance existing debt with a combination of debt and equity. It expects the deal to immediately add to adjusted earnings, before synergies, after closing in the third quarter.