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Spin-off talk sends software maker's shares soaring

Shares in Transaction Systems Architects rise 44 percent on optimism that the company is planning to spin off of at least one of its business segments.

    Shares of banking software maker Transaction Systems Architects rose 44 percent today on speculation that the company is planning to spin off of at least one of its business segments.

    Credit Suisse analysts Mark Wolfenberger and Wayne Segal released a research note today saying they believe Transaction Systems is likely to spin off one of its business units to focus on the Internet. They also raised their rating on the shares to "strong buy" and set a $60 price target.

    Transaction Systems' shares rose $12.13 to $39.88 on volume of 9.15 million shares--more than nine times the stock's average daily volume during the past three months.

    Omaha-based Transcation Systems makes software used in electronic payments and transactions. The firm's core product is its BASE24 software, which large financial institutions and retailers use to clear transactions.

    "Our software is more of a back-end than front-end solution," said LeRoy Peterson, director of investor relations for the company. "It drives the switches and settles the actual transaction."

    Peterson said that nearly one-fourth of the nation's largest retailers are Transaction Systems' customers, including Kmart, Walgreens and Target.

    In an interview, Wolfenberger said Transaction Systems recently indicated in a public statement that it was planning to spin off a business.

    The statement, released on Feb. 22, said the company aims to "unlock shareholder value in TSA, through the injection of new capital into newer business units." The statement also noted that several of Transaction's business units that it would potentially spin off resemble companies in the market with proven value.

    The CSFB analysts pointed to HNC Software, a "cousin company" of TSA, which spun off a unit last November that increased shareholder value significantly, as a historical precedent to support a spin off.

    Wolfenberger said Transaction Systems could spin off units that deal with corporate banking, consumer banking, e-commerce and global banking.

    "It would be easiest to (initially) make one of the segments public because then they can decide at that point what to do with the others," Wolfenberger said. "They may not decide to spin-off more because that would give away some of the ownership they have in their own company."

    Peterson said a spin-off is just one option the company is considering.

    "Internet banking is a natural progression from what (the company) was doing before?.We will still be doing a lot of the same stuff but we need to invest more in these (business segments) as the world becomes more Internet-centric."