Starboard Value Pushes Payments Firm ACI Worldwide to Pursue Sale
(Bloomberg) -- Activist investor Starboard Value is urging ACI Worldwide Inc. to explore a sale, arguing that a takeover is more likely to create value for shareholders than the payment company’s standalone plan released last month.
Starboard Managing Member Jeff Smith said in a letter to the company Wednesday that its revenue growth and margin targets are so conservative that it “seems almost impossible for management to miss.”
ACI Worldwide should instead hire advisers to run a sales process, Smith said. A wide range of strategic and financial buyers would be interested in acquiring the company, he said.
“We have reason to believe that some of these potential buyers may have approached ACI to express interest,” Smith said in the letter, a copy of which was reviewed by Bloomberg.
Shares of ACI Worldwide climbed 8.8% to $36.31 apiece at 9:59 a.m. in New York Wednesday, after earlier jumping as much as 10.2%.
A representative for Naples, Florida-based ACI Worldwide didn’t immediately respond to a request for comment.
Starboard, which owns a 9% stake in ACI Worldwide, has argued it’s undervalued and has underperformed its peers. Shares in the company were down about 11% in the past year before Wednesday’s report.
The letter doesn’t mention whether Starboard is considering a proxy fight at the company if it doesn’t pursue a sale. Starboard would have until March 11 to nominate directors.
The wave of consolidation in the payments industry in recent years included the acquisition by Italy’s Nexi SpA of Nets A/S last month. ACI Worldwide, which was founded in 1975, has grown through a series of acquisitions itself. With a market value of $3.9 billion, though, it’s dwarfed by larger rivals such as Fiserv Inc.
Smith argued during a presentation in October that, while ACI Worldwide is in early stages of a turnaround, it’s also an attractive takeover target because of its size and portfolio of attractive assets. He said then he would be watching the Nov. 10 analyst day to assess the company’s standalone plans.
In Wednesday’s letter, Smith said those plans fell short of what’s needed and carried execution risk. The company’s planned transition to a subscription pricing model might take up to a decade to complete, he said, noting ACI Worldwide had failed to meet the long-term goals it had set for itself over the past four analyst days.
“While management’s long-term plan may create value, the plan isn’t good enough to justify remaining a standalone public company,” Smith said. It’s incumbent on the board to weigh its standalone plan against the value it could realize through a sale.
“In light of this, we expect the board to retain advisers and conduct a full and fair sale process,” Smith said.
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