As we announced early this week, Misys plc and Temenos Group AG are in discussions regarding a possible all share merger. The exchange ratio will be 4.1 Misys shares to 1 Temenos share. In Luxembourg, 11 banks are concerned and for employees, the merge will bring a lot of Temenos staff back into their former employer: Misys.

On the other hand, Mike Lawrie, CEO of Misys will quit and Guy Dubois, CEO of Temenos, will lead the new entity.

Further to the announcements made on 3 February 2012, Temenos and Misys today confirm that they have reached agreement in principle on certain key terms and are in continuing discussions regarding a possible all share merger of the two groups.

Misys and Temenos believe that the combination would create one of the leading companies in the financial services software industry with the prospects for long term growth underpinned by increasing demand amongst financial institutions for improved efficiency and customer service.

The combined business is expected to benefit from enhanced scale and growth prospects, supported by a global, blue-chip customer base. Temenos and Misys believe that Temenos’ presence in banking, wealth management and business-intelligence complements Misys’ presence in core and transaction banking, treasury capital markets and lending.

It is expected that the combination will yield significant cost savings and operational synergies through scale efficiencies and cross-selling opportunities.

Following completion of such merger it is intended that Misys shareholders will own approximately 53.9 per cent of the issued share capital of the combined group and Temenos shareholders will own approximately 46.1 per cent, after taking into account dilution from options outstanding and excluding the effects of the potential conversion of Misys’ Convertible Bond. The exchange ratio will be 4.1 Misys shares to 1 Temenos share.

Guy Dubois, currently CEO of Temenos, will act as CEO of the combined group and Stephen Wilson, currently CFO of Misys, will act as CFO of the combined group. Both Guy and Stephen will become members of the Board of Directors which will be chaired by Andreas Andreades, currently chairman of Temenos. It is envisaged that the Board of the combined group will comprise of 9 individuals in total: 5 nominated by Misys and 4 by Temenos. ValueAct Capital, the largest shareholder in Misys, has indicated its strong support for the proposed merger and will be represented on the Board. Mike Lawrie, CEO of Misys, has informed the Board of Misys that he will be pursuing a new opportunity.

Misys and Temenos currently intend to merge under a new holding company that will seek a premium listing on the London Stock Exchange with a potential secondary listing on SIX Swiss Exchange. The combined group is expected to be headquartered in Switzerland.