Francois-Charles Oberthur Group of France, the third-largest bank note printer in the world, has agreed to purchase Kirk Plastic Co., the second- largest card manufacturer in the United States.
The deal, announced last week, follows the sale of other North American plastic card producers to European companies over the last two years.
Gemplus bought a U.S. manufacturing base from DataCard Corp., and competitor Schlumberger acquired Malco Plastics. Giesecke & Devrient of Germany bought Security Card Systems of Canada, and De La Rue of Great Britain bought McCorquodale.
Los Angeles-based Kirk Plastic had announced a joint venture with Orga Card Systems Inc., a German smart card company, in July 1995, but those negotiations were terminated several months ago.
Kirk R. Hyde, president of Kirk Plastic, a 77-year-old family-owned business, said Oberthur made a better partner. Mr. Hyde, 53, will sign a three-year employment contract with Oberthur, also a family business, which is 70%-owned by Jean-Pierre Savare. Kirk Plastic will keep its name and 2,500 employees.
Mr. Hyde said he'd had reservations about selling his company, but "if we don't make the deal, we could be out of business in five years if smart cards take over."
He said his competitors were purchased by large European concerns driven by smart cards and technological changes. "I could no longer keep up with investments to remain competitive," he added.
The new owner will infuse capital and technology, and add distribution channels. Mr. Hyde would not disclose specific terms of the deal, which is scheduled to close within 30 days.
Industry observers see the European invasion as concrete evidence that smart cards are gaining ground in the United States.
"It's another indication that many companies are betting millions that the U.S. market will develop very quickly," said Dan Cunningham, senior vice president of business development at Phoenix Planning and Evaluation Ltd., a Rockville, Md.-based consulting firm.
Mr. Cunningham headed Gemplus' U.S. subsidiary before it acquired the DataCard manufacturing facilities.
In Atlanta, Visa is testing Visa Cash, the stored-value smart card system launched in conjunction with the Olympic Games.
By early next year, Visa will join with MasterCard, Citibank, and Chase Manhattan Bank in a potentially crucial "interoperability" test on Manhattan's Upper West Side.
In other signs of U.S. progress in the smart card industry: Wells Fargo and Co. and AT&T Universal Card Services became owners of Mondex International, the company formed by National Westminster Group of London; several universities are implementing smart card systems on campuses in conjunction with banks; and U S West rolled out card-reading phones in several western states.
Even so, smart cards are not producing income here. Mr. Cunningham said acquisitions of profitable companies like Kirk can generate funding for early smart card development.
Kirk Plastic, with annual revenues of more than $25 million, said it will produce 125 million magnetic stripe cards this year.
Oberthur, an international producer of lottery tickets and plastic cards in addition to bank notes, participates in a joint venture, CP8 Oberthur, which is one-third owned by Bull Group of France, another top smart card producer with U.S. facilities.
CP8 Oberthur produces 50 million smart cards annually in two French factories, supplying nearly 70% of French bank cards.
Oberthur's U.S. subsidiary, Banknote Corporation of America, is the second-largest security printer in the United States.
