Intuit announced on Thursday plans to acquire on-demand applications provider Digital Insight for $1.35bn in cash, giving Intuit deeper inroads into the banking industry.
Intuit, a financial-management software maker that focuses on consumers and small businesses, will pay Digital Insight shareholders $39 per share for each common share they own. The deal is expected to close in the first quarter.
Digital Insight, based in Calabasas, California, provides online banking services. The combined companies are expected to serve 5,000 financial institutions, 25 million consumers and 7 million small businesses.
"This deal is all about increasing revenue growth rates," Steve Bennett, Intuit chief executive, said during a conference call with analysts.
The transaction is designed to position Intuit to attract a larger number of financial institutions as customers, while allowing Digital Insight to more easily market its products to end users, Bennett said.
He added that the deal is also designed to benefit small businesses, which he said are underserved by current, consumer-oriented online banking offerings.
Shares of Intuit traded down slightly in mid-morning trading, despite some analysts applauding the deal.
"We like this acquisition, as it can expand Intuit's addressable markets toward tens of millions of additional consumers, as well as small businesses, which may not be among Intuit's 3.7 million QuickBooks customers," Daniel Cummins, a Banc of America Securities analyst, said in a research note.
Cummins added that he would expect the combined company to venture into the online health-care financial management market over time.
Intuit will form a new financial-institutions business division and will continue to operate Digital Insight's California and Georgia facilities.
Once the transaction is completed, Intuit said, it will aim to deliver new "killer" applications in the summer that will run on Digital Insight's online banking platform. Currently, Intuit's Quicken uses Metavante, a financial-services technology company, to deliver its online service.
Intuit may also review the potential for building online capabilities within its Quicken and QuickBooks financial management software, Bennett said.
"Most online banking services will say what cheques have cleared, but not indicate whether there's enough money in the account to pay upcoming bills," Jim Stiefler, Digital Insight chief executive, said during the conference call. "Quicken provides that capability, but not online."
