The Green Sheet Online Edition
December 13, 2010 • Issue 10:12:01
VeriFone pays $485 million in stock for Hypercom
VeriFone Inc. has deep roots at the merchant POS. VeriFone terminals were the first to support POS electronic draft capture in the United States, and today VeriFone terminals account for about 62 percent of the domestic POS terminal market.
Now, with the news that VeriFone is acquiring its chief competitor - Hypercom Corp. - VeriFone is positioned to dominate the domestic and international markets for POS terminals and supporting systems.
In a statement released on Nov. 17, 2010, the two companies said they had a "definitive agreement" under which VeriFone will acquire Hypercom in a stock transaction valued at about $485 million.
The agreement, approved by the boards of each company, calls for Hypercom shareholders to receive 0.23 shares of VeriFone stock for each Hypercom share they own, as of Nov. 16, when Hypercom shares were trading at $7.32. VeriFone also assumes Hypercom's outstanding warrants and stock options as part of the transaction.
Seeking international clout
VeriFone's Chief Executive Officer, Douglas G. Bergeron, noted in the statement that the acquisition is in keeping with the company's strategy of replicating its success in the U.S. market in key European markets.
"Hypercom has established itself in a number of important European markets, and this acquisition is an excellent and complementary way for us to accelerate our overseas growth, increase innovation and build value for our shareholders," Bergeron said.
Hypercom has been vying with VeriFone for a share of the U.S. terminal market since the mid-1980s, when Hypercom, with headquarters in Australia and a significant share of the Asia-Pacific terminal market, set up shop in Phoenix.
VeriFone, with its roots in California, consistently held sway, never dipping much below a 60 percent market share. But Hypercom did gain share and had some major brand name clients, too, including Citigroup Inc. and Home Depot Inc. For its part, VeriFone has been building its international client base and trying to bolster its presence in the nascent mobile payment market.
On an acquisition roll
VeriFone made an unsolicited offer for Hypercom in September that was valued at about $290 million, and which Hypercom rejected. The deal that was just struck is expected to close during the second half of 2011, subject to regulatory approvals and a final OK from Hypercom stockholders.
The acquisition of Hypercom is just the latest in a string of deals achieved this year by VeriFone. In October 2010, the company disclosed it would be working with PayPal Inc. on a mobile payment app, and that it had acquired a software development firm in Italy.
In September, VeriFone acquired Way Systems Inc. Way Systems was founded in 2002 with seed money from Bill Merton, a former VeriFone chief executive.
Its specialty has been mobile POS terminals and supporting gateway systems. The Hypercom deal is also the third acquisition of a competing terminal manufacturer since VeriFone was taken public in 2005. In 2006, the company acquired Lipman Electronic Engineering Ltd., a terminal manufacturer based in Israel that had a modest U.S. footprint.
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