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Fidessa upgraded to 'neutral' by UBS after agreeing Temenos takeover

UBS has suggested Fidessa moves roles offshore to improve its operating margins
Fidessa's deal with Temenos is expected to deliver cost synergies of US$60mln

Fidessa PLC (LON:FDSA) has been upgraded by UBS after agreeing to be taken over by Swiss banking software firm Temenos AG.

Temenos is paying £35.67 per Fidessa share in an all-cash deal that values the UK software company at about £1.4bn.

READ: Fidessa agrees takeover bid from Swiss banking software company Temenos for around £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 

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