U.S. Fund Is in Talks to Buy Sapiens at a $460m Valuation

Francisco Partners seeks to buy Formula System’s 48% stake in insurance software maker

Ofer Vaknin

The U.S. high-tech private equity fund Francisco Partners is in talks to buy a controlling stake in Sapiens, an Israeli maker of software for the insurance industry, in a deal that may value the company at $460 million, TheMarker has learned.

Formula Systems, the Israeli technology holding company, has offered to sell its 48% holding in publicly traded Sapiens at $10 a share, a 30% premium over Sapiens’ Nasdaq-traded shares, sources told TheMarker.

Sapiens was trading 0.7% higher, at $7.61, late in the afternoon New York time. Formula Systems, whose other holdings include the software maker Magic and the information technology consulting company Matrix, declined to comment on the report.

Under the management of Roni Al-Dor, Sapiens has enjoyed a business turnaround that has seen its share prices climb from about $1 five years ago. In the first quarter, Sapiens posted a net profit of $3.4 million, down slightly from $3.6 million a year earlier, as revenue climbed to $36.6 million from $31.5 million.

The company is forecasting full-year 2014 sales of between $154 million and $158 million.

Sapiens is scheduled to report its second-quarter results today.

Francisco Partners, with offices in San Francisco and London, specializes in investing in and turning around high-tech companies, mostly in the United States and Britain within five years after acquiring them.

More recently, the fund opened an Israel office headed by Eran Gorev, a former CEO of the wireless-equipment maker Alvarion, and before that CEO of Nice systems.

However, Francisco Partners has been active in Israel for more than a decade, buying the library software maker Ex Libris in 2006 for $62 million, then selling it two years later to the Leeds Fund for an estimated $200 million.

In 2008, together with the U.S. venture capital fund Sequoia Partners, the fund acquired Israel’s Dmatek for $77 million. Trading in London, the company, a maker of electronic-monitoring equipment for the elderly and for prisoners, was renamed Attenti and sold 20 months later to the U.S. company 3M for an estimated $230 million.

Francisco Partners is not the first buyer to pursue Sapiens. Alpha Group, led by a group of former Amdocs executives, including Avi Naor and Boaz Dotan, entered negotiations to buy the company, but on June 25 Formula Systems reported that the talks were off.

Alpha was reportedly offering to buy Sapiens at a valuation of $420 million to $430 million.