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In a deal that underscores the growing importance of electronic billing and presentment, New York City-based private-investment firm Cerberus Capital Management has agreed to buy the Regulus and J&B Software payments units from India-based 3i Infotech Ltd. The deal, valued at $137 million, is expected to close within about 60 days.
The units, which had been fully integrated under 3i Infotech, will function as a standalone portfolio company under Cerberus’s ownership. Napa, Calif.-based Regulus processes online bill payments, while J&B, Blue Bell, Pa., produces transaction-processing software, primarily for banks. Among its products is a remote deposit capture application for mobile phones, developed using software from Mitek Systems Inc.
Cerberus, which numbers the supermarket chain Albertsons LLC among its investments, has stakes in financial-services and IT firms but has not until now invested directly in payments. But with Regulus and J&B, Cerberus can leverage a trend toward electronic presentment of bills and invoices, says Nancy Atkinson, a senior analyst at Boston-based Aite Group. Such presentment, which involves replacing paper bills with electronic transmissions, stimulates electronic bill payment and, in the case of invoices, allows small businesses to automate the capture of transaction data.
“We’re seeing a strong focus on the combination of billing and payment,” Atkinson notes. The value of transaction data to businesses, she adds, can’t be overestimated, though companies have been slower than consumers to accept electronic invoicing. “The value that can be gotten out of electronifying an invoice [is a multiple of that which] can be gotten out electronifying a bill,” she says.
Cerberus “see[s] growth potential in the marketplace,” adds Josh Wendroff, director of marketing for 3i Infotech North America. Wendroff will be among the executives going with the acquired units.
The companies have had a relatively short tenure under 3i, with J&B having been acquired in 2007 and Regulus the following year. 3i, which specializes in IT services and consulting, said the deal will help it focus on its core business. “The divestment reduces the leverage and strengthens the balance sheet of 3i Infotech,” V. Srinivasan, managing director and global chief executive for the company, said in a statement. “This enables 3i Infotech to go back to its roots as a significant IT products and services player.”
3i had also hoped it could combine the two payments businesses with a consulting overlay, an ambition that may not have worked out as well as it thought it would, Atkinson says. “I’m not sure the consulting ever came about,” she says.
