Temenos is paying £35.67 per Fidessa share in an all-cash deal that values the UK software company at about £1.4bn.
UBS raised its rating on the stock to ‘neutral’ from ‘sell’ and lifted its target price to 3,647p from 2,140p.
The deal is expected to deliver cost synergies of US$60mln, including US$50mln in operational efficiencies and US$10m in duplicated costs.
UBS said US$39mln of cost savings could come from the reduction of 300 roles in general and administration while a further US$11mln could be generated by moving jobs in research and development and in support offshore.
The bank pointed out that Fidessa’s average salary per employee of US$129,000 is above the peer group average of US$95,000.
“Whilst we believe that Fidessa has a robust business model, driven by highly visible recurring revenues (88%), it has one of the lowest operating margins in our software coverage,” UBS said.
“With the company currently run without taking advantage of on-/offshore capabilities, we think it has a suboptimal cost structure.”
Shares in Fidessa were little changed