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Financial technology firm DH Corp. is set to expand globally and target bigger banks as it acquires Fundtech Ltd., provider of payment processing and other services.

Toronto-headquartered DH said Monday that its $1.25-billion (U.S.) deal for New York-based Fundtech offers offers a platform to expand DH's business in the United States and in other countries around the world.

Fundtech has 19 international offices in countries such as Switzerland, Israel and India. The company, which left the public markets in 2011 after being acquired by private equity firm GTCR, counts roughly 1,200 financial services firms as clients. It provides global and domestic payments software and other transaction services. By aligning with Fundtech, DH will be able to attract larger bank clients in the U.S., according to DH chief executive officer Gerrard Schmid.

"Banks spend a lot on technology – U.S. banks, last year, spent about $55-billion on technology and that's growing at about 6 per cent per year," Mr. Schmid said. "We're currently benefiting from an economic recovery … and this further accelerates that exposure."

Once known as Davis + Henderson Corp., DH has experienced a swift expansion in recent years. The firm used to be primarily a Canadian cheque-printing business before 2006, when it moved to diversify into financial technology. Growth into new products and new markets have both been key strategic priorities, and nearly half the company's revenue now come from the U.S.

The Fundtech acquisition is DH's largest of the company's nine deals, and follows DH's $1.2-billion purchase of banking software company Harland Financial Services in 2013. Following that deal, DH moved to pay down debts. This acquisition comes at a time when many global banks are grappling with new payment types and channels, outdated legacy payment systems and increasingly complex regulatory environment, Mr. Schmid said.

Over the past 20 years, significant growth in international commerce and associated payment volumes has driven increased adoption of new technologies, DH said. The proliferation of payment types and channels requires updated software systems to accommodate higher payment volumes. Technology companies with scale that can provide extra services will get more business from these banks as they look to consolidate service providers, DH said. DH will fund the acquisition in part through an $826.2-million bought deal financing co-led by CIBC World Markets, RBC Dominion Securities and Scotia Capital. The deal is made up of a purchase of $626.2-million in subscription receipts and $200-million in convertible debentures – they will come due in Sept. 30, 2020, and with a conversion price of $52.75. DH shares closed at $39.60 (Canadian) on Monday.

The company's syndicate of lenders have also committed to provide an additional $800-million of debt financing.

The deal is expected to close in the second quarter of 2015, pending regulatory and other customary approvals. DH says the deal is expected to be accretive within the first 12 months after closing.

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