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Security First gets Intuit money

The developer of Internet apps gets $50 million from the personal-finance software biggie. Meanwhile, Security First makes some investments of its own.

Security First Technologies, a developer of Internet application software for financial transactions, agreed to pay $1.4 billion in stock for FICS Group of Belgium and Edify, both makers of similar software, as demand increases for electronic banking.

Separately, Intuit, the personal-finance software maker, will buy a 2.5 percent stake in Atlanta-based Security First for $50 million. That transaction values each share at 51.50.

The acquisitions create a formidable player in providing software to put financial services companies online, strengthening Security First's hand against competitors like Microsoft, BroadVision, and Integrion, which is owned by a consortium of major North American banks.

"Quite a power move for Security First," said Scott Smith, e-commerce analyst with Tera Group, noting that FICS is strong in Europe and Edify has had a high profile in the United States. "And it certainly doesn't hurt to have a partnership with Intuit and its money."

Banks and insurers are increasingly relying on electronic delivery and financial reporting systems to link with their customers, although that market has been slower to take off than many expected. Security First estimates the $500 million worldwide Internet banking market will expand 40 percent annually to about $2.7 billion by 2003, citing figures from Dove Associates, a Boston-based consulting company.

Market research firm Zona Research called Security First's moves "The right pieces in the right place at the right time, and a good chance to grab market share near term."

"Every industry goes through a consolidation, and instead of following consolidation, we're leading it," said Charles Ogilvie, executive vice president at Security First. FICS adds banking software for major corporations, and the three companies had only two overlapping customers, he added.

Security First is paying about $1.08 billion for closely held FICS and $345 million for Santa Clara, California-based Edify. It's offering 0.330969 of a share for each in Edify, valuing each share at 17.87, a 15 percent premium to Friday's close.

Ogilvie said the product offerings at Security First, Edify, and FICS have little overlap and the companies could end up hiring after the merger is complete. The combined entity, to be called S1 Corporation., would have a workforce of about 1,500 people, which could expand to 1,900, he said.

Shares of Security First fell 3 to 51 on the news, while Edify fell 0.6250 to 14.9375. Intuit gained 0.3125 to 73.8125.

The combined transactions will increase Security First's shares by 26.4 million shares. It has about 12.5 million shares outstanding. Earlier this year, Hewlett Packard invested $10 in Security First.

Intuit's investment will pave the way for it to expand connections for its tax preparation and small-business accounting software.

"We as a company are not really set up to do the kind of sales, service, and support that a company like S1 is, yet we've got great tools," said Intuit chief executive Bill Harris. "Being able to integrate our tools with online banking solutions such as those created by Security First is a win-win for everyone one."

For example, Harris said, the cooperation could make it easier for users of Intuit's Web TurboTax service, which lets taxpayers fill out returns on the Internet, to pull financial data for tax purposes from their bank's records. S1's Ogilvie said the alliance would accelerate efforts to integrate Intuit's small business accounting software, QuickBooks, with online banking applications from Edify.

The new company will be based in Atlanta, with Security First's chief executive James Mahan as chief executive. Michel Akkermans, chief executive and chairman of FICS, will become S1's chairman.

Security First had 1998 sales of $24.2 million, employs more than 375 people, and its clients include more than 100 financial service companies. Edify employs 470 people and has 300 financial service companies and more than 1,250 other organizations as customers.

Intuit is buying 970,813 shares and has options to buy up to 9.9 percent of S1, or an additional 5.6 million shares at $51.50 each, Ogilvie said.

Security First expects to complete the transactions by December, though they could be closed by September. The company formerly had its own online bank, which it sold last year.

Bloomberg contributed to this report.