European financial and wealth management technology firms Temenos and Misys yesterday confirmed they have reached agreement in principle on certain key terms and are in continuing discussions regarding a possible all-share merger.

The statement follows an earlier announcement on 3 February that the two businesses were in talks.

"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 statement from the firms said.

"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 said.

The firms said they expect that a merger will produce "significant cost savings and operational synergies through scale efficiencies and cross-selling opportunities."

If a merger proceeds, Misys shareholders will own about 53.9 per cent of the issued share capital of the combined group and Temenos shareholders will own around 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.

Under such a deal, Guy Dubois, currently chief executive of Swiss-based Temenos, will act as CEO of the combined group and Stephen Wilson, currently chief financial officer of Misys, will act as CFO of the combined group.

Both men 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 fourteen individuals in total: five nominated by Misys and nine 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," the statement said.