Bottomline Technologies Stock Rockets on Hopes for Sale

Bottomline didn’t respond to messages for comment. Deutsche Bank declined to comment. 

Founded in 1989, Bottomline is a conglomerate of several different businesses. It provides cloud software for corporate digital banking and also operates a B2B payment-settlement network. Its software helps businesses automate their accounts payable while its legal-spending management operation aids insurance companies in overseeing their legal expenses. It has more than 10,000 customers including banks, insurance companies, and healthcare organizations.

Bottomline, which went public in 1999, produces about $500 million annually in revenue. It competes against other large bank-technology companies such as

Fiserv

(FISV),

Fidelity National Information Services

(FIS), and

Jack Henry & Associates

(JKHY). 

Deutsche Bank’s hiring comes just months since Bottomline agreed in October to add three new directors to its board at the request of activist shareholders

Clearfield

Capital Management and Sachem Head Capital Management. With the three directors, Bottomline’s board grew to 11 people.

Bottomline that month also formed a strategy committee that it said would make recommendations on the company’s market position, strategy, and opportunities to create additional shareholder value. Clearfield and Sachem didn’t respond to messages seeking comment. 

Peter Heckmann, senior research analyst at D.A. Davidson, said in a research note Friday that he wasn’t surprised by the news, especially given that Bottomline had formed the committee. “While we can’t rule it out, we think a sale of the entire company is unlikely, and we suspect management would prefer to remain independent,” said Heckmann, who maintained a Neutral rating on Bottomline stock, with a target of $50 for the price.

Heckmann in February criticized Bottomline in another research note, saying the company wasn’t living up to the potential of their major growth businesses. He called on Bottomline management and its board to commit to an achievable three-year plan for growth and margins.

Bottomline doesn’t have to sell the whole company but could unload one of its business units. Heckmann thinks Bottomline should divest its legal-spending management group to an insurtech and focus more on developing its payments and digital banking segments.

In the event of a sale, Heckmann said, Bottomline could be valued at between $54 and $60 per share, or $2.5 billion to $2.8 billion. The company has very little debt, about $130 million at the end of the quarter ended Sept. 30, Heckmann said. It has $127 million of cash. 

Bottomline has attracted interested from private-equity buyers, Bloomberg said, but according to one investment banker, it has too many disparate businesses to attract a strategic buyer. PE firms that have invested in payments companies include GTCR, Lightyear Capital, and Stone Point Capital. 

Write to Luisa Beltran at luisa.beltran@dowjones.com