VeriFone Systems Inc.’s move to buy the point-of-sale terminal business of card maker Gemalto NV could be a good fit for the terminal maker, especially if its quest to buy rival Hypercom Corp. fails, analysts say.
San Jose, Calif.-based VeriFone on Oct. 20 announced it is in exclusive talks to buy Gemalto’s terminal business. The companies also have formed a strategic partnership that includes a deal to work together on chip card products and services (see story).
VeriFone’s acquisition of Gemalto’s terminal business is “substantially finalized,” but the deal is subject to French laws that require approval from a works council, which represents workers, a VeriFone spokesperson says. The deal could take 30 to 90 days, or longer, he says, depending on the alacrity of the works council.
Gemalto’s terminal business would be a “consolation prize” if VeriFone fails in its attempt to buy Hypercom, says George Sutton, an analyst at Minneapolis-based Craig-Hallum Capital Group LLC. He estimates Gemalto shipped 470,000 POS terminals in 2009, mostly to Africa, the Middle East and France, and generated approximately $80 million in terminal revenue.
The Gemalto deal also may serve another purpose, Sutton says.
“It’s more of a negotiation tactic on the part of VeriFone than anything else,” Sutton tells PaymentsSource. “It may accelerate the process of bringing VeriFone and Hypercom together.”
Indeed, analyst Gil B. Luria from Los Angeles-based Wedbush Securities sees potentially good news for VeriFone if the Gemalto deal is consummated.
“A possible acquisition of Gemalto’s terminal business would represent a better deal for VeriFone as compared to Hypercom, as it would expand VeriFone’s scale and reach with far less complexity,” Luria writes in a research note. “However, we do not believe that this deal would necessarily replace a Hypercom bid. It would only make it less likely.”
Scottsdale, Ariz.-based Hypercom last week rebuffed VeriFone’s latest offer and had asked for no further negotiations until after Nov. 2, when Hypercom releases its next quarterly earnings (see story).
The Gemalto deal does not alter the company’s interest in Hypercom, VeriFone says.
And with no other apparent Hypercom bidders, VeriFone may be enticed to stick with its offer of $5.25 per share of Hypercom stock, Luria says. Lack of competition also may “drag out” VeriFone’s quest for Hypercom, he notes.
VeriFone and Gemalto will “pool their expertise to facilitate the adoption of EMV worldwide, particularly in the United States,” Paul Beverly, president of Gemalto North America, tells PaymentsSource.
“Obviously the United States is virgin territory for EMV, but we do believe that adoption is inevitable, although it’s unclear as to the form–contact, contactless or mobile–or the timeline,” the VeriFone spokesperson says. “Elsewhere, EMV is moving ahead, although the pace of adoption varies from region to region and country to country.”
Meantime, Gemalto will supply VeriFone with machine-to-machine wireless communication technology used to remotely monitor and deliver commands to devices, such as when to apply software updates, VeriFone says.
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