Japans nec has agreed to buy switzerlands largest software provider to banks for sfr2.05bn ($2.2bn) in its biggest foray into the global fintech space.
The sale of avaloq to the japanese technology group ends a three-year investment by warburg pincus, which paid close to sfr300m for a 35 per cent stake in 2017. the private equity group now owns 45 per cent of the privately held group, with the rest in the hands of avaloqs founder francisco fernndez and its employees.
Necs acquisition follows years of restructuring involving the loss of 3,000 jobs and the offloading of unprofitable businesses. the deal, which is expected to close by april, builds on necs purchase last year of kmd, a danish it services group, for dkr8bn ($1.2bn), and its 475m takeover of uks northgate public services in 2018.
Earlier this year nec also sealed a capital tie-up with japans largest telecoms operator ntt to better compete in the global race to supply 5g equipment.
Shares in nec briefly rose more than 2 per cent on monday morning following the announcement of the deal.
Avaloq has about 2,300 employees and serves more than 150 banks and wealth managers in financial centres including london, frankfurt and paris.
At an online news conference, takashi niino, necs chief executive, said the company planned to use its blockchain and facial recognition technologies to serve the security and privacy needs of avaloqs clients.
The fintech deal comes as the pandemic has accelerated the trend towards digitalisation both in the banking sector and within government agencies.
We can expect long-term growth in the market, mr niino said.
Though richly valued at around 20 times adjusted earnings before interest, tax, depreciation and amortisation, takayuki morita, necs chief financial officer, argued the purchase price was justified by avaloqs expected annual growth rate in ebitda of 15 per cent.
The swiss group was lossmaking last year partly due to investment costs in data centres. it recorded a net loss of sfr29.8m in 2019 while revenue increased 6.4 per cent from a year earlier to sfr609m, 70 per cent of which came from europe.
In a statement, juerg hunziker, avaloqs chief executive, said the deal would help the swiss group expand its geographical footprint beyond europe.