07/23/2013 04:08 EDT | Updated 09/22/2013 05:12 EDT

Davis + Henderson Corp. acquires U.S. bank software company for $1.2B

TORONTO - Financial technology provider Davis + Henderson Corp. (TSX:DH) said Tuesday it has signed an agreement to buy U.S.-based Harland Financial Solutions for approximately US$1.2 billion in cash.

D+H chief executive Gerrard Schmid said the deal gives the company the scope and scale needed to compete in the U.S. market.

"It more than triples our U.S. customer base and expands our business into profitable and growing new areas of the U.S. fin-tech market," Schmid told a conference call with financial analysts.

"It rebalances our revenue geographically and by service line, providing a good boost to our strategic diversification efforts."

D+H said the deal for the financial services software company will give it access to 5,400 U.S. bank and credit union clients.

"It delivers a solid financial return by materially increasing our revenues and earnings with good margins, is accretive and makes us more comparable to our U.S. publicly traded fin-tech peers," Schmid said.

Best known as a provider of cheques for bank customers, the company has been diversifying its business in recent years as its traditional cheque-printing business has come under pressure.

HFS provides software and services that help banks with branch automation and business intelligence as well as loan compliance, loan servicing and risk management.

"We are excited by the prospect of becoming part of D+H and believe that this transaction is right for both our customers and our employees," said HFS chief operating officer Bill Zayas.

The deal is subject to regulatory approval U.S. and other conditions.

To pay for the purchase, D+H has signed an agreement with a syndicate of underwriters to sell nearly $400.2 million in subscription receipts and $200 million in convertible unsecured subordinated debentures.

The company said a syndicate of existing and new lenders has also offered to provide funding for the acquisition.

Earlier this year, D+H acquired full ownership of California-based Compushare Inc., as part of its strategic focus on financial technology services.

Compushare uses online technology to assist financial institutions control costs and improve efficiency as they prepare for increased compliance requirements.

Shares in D+H, which were halted pending the announcement, closed up 13 cents at $22.98 on the Toronto Stock Exchange on Tuesday.

D+H is expected to release its second-quarter results after the close of markets on Aug. 7.