LONDON (AFX) - UK software firm Misys lost almost a fifth of its value today after terminating talks with a management buyout team headed by chief executive and founder Kevin Lomax, who will now leave the company.
Chairman and acting chief executive Sir Dominic Cadbury said he had 'no choice' but to end the protracted auction process after a string of potential bidders failed to table a firm offer for the troubled banking and healtchare software specialist.
'Proposals that were made were indicative only and highly conditional,' Cadbury told analysts and investors on a conference call this morning.
'We made it clear to the parties involved they should put forward their best price but ... no offer was forthcoming, and we had no choice but to terminate the process without delay on Friday evening.'
News of the collapsed bid talks sent shares in Misys, which also issued a profit warning this morning, tumbling 29-1/2 pence to 186-5/8 pence, a fall of 17.5 pct.
Lomax, who founded the company in 1979, was behind an initial takeover approach in June, which was reported to have the backing of private equity houses Permira and General Atlantic.
Lomax's move flushed out interest from a number of trade buyers, believed to include US technology groups Fiserv and SunGard, but they pulled out of the race following a sharp rise in the share price.
Permira and General Atlantic, too, are understood to have baulked at paying an inflated price for Misys, particularly given a barrage of disappointing trading news over the past year.
Saturday's Financial Times also reported that due diligence conducted by the private equity companies revealed that more work would be needed to rebuild Misys than previously thought, particularly at its healthcare software unit.
Analysts at independent research firm Ovum were damning in their assessment of Lomax's reign at Misys.
'Lomax has been a pretty poor leader of Misys over the last 10 years, providing zero shareholder return in the process (even) before the 20 pct slump in the share price today,' said Ovum.
His successor is expected to be named 'around the middle of October', said Misys.
Talks over Lomax's severance package are still on-going, according to a spokesperson, who confirmed that the chief executive was on a 12-month rolling contract with a basic salary of 480,000 stg. Lomax held 7.46 mln shares in Misys at the end of May.
Dissatisfaction over the way the bidding process was managed and this morning's dire trading news is likely to come to a head at Wednesday's AGM.
A number of major investors are believed to have threatened to vote against the re-election of directors, including chairman Sir Dominic Cadbury, according to reports.
Misys' longer-term prospects seem even less clear. Ovum believes that breaking up company into its three component businesses would be the 'best route' for the incoming chief executive to take.
The research house said it was even possible that General Atlantic and Permira would return to the negotiating table should the share price fall below 150 pence.
In its trading statement this morning, Misys warned that it expects adjusted earnings per share to fall below the 14.3 pence reported last year, blaming a handful of 'previously highlighted' factors.
Increasing pressure in competing for smaller practices had hampered its healthcare division.
Meanwhile, the dilutive effect of the sale of its General Insurance business last May, losses from the acquisition of PayerPath and other assets and the impact of exchange rates on its US Healthcare business would also hit EPS, it said.
The company said its banking division and Sesame business have traded in line with expectations and ahead of last year during the first three months of the year. simon.duke@afxnews.com sd/ak COPYRIGHT Copyright AFX News Limited 2005. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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