Plagued by a sagging stock price and sudden executive resignations, NPC Inc., the nation's second-largest merchant processor, may now be a takeover target.
The Louisville, Ky.-based company, which was spun off from National City Corp., could be appetizing to the likes of First Data Corp., Citicorp, or Banc One Corp., according to industry sources. These firms could pay anywhere from $18 to $25 a share for NPC, sources said.
NPC's stock closed Thursday unchanged at $9.87 per share.
A spokesman for Cleveland-based National City, which owns 85% of NPC's stock, said the company is not for sale. "We're dedicated to the success of that business," said Daniel L. Shingler, the spokesman.
But industry observers said the bank has been frustrated with the poor performance of NPC's stock since the processor went public in August for $16.50 per share. Though NPC quickly hit a high of $21.00, it suffered substantially after the October loss of a contract to process credit card transactions for Wal-Mart Stores Inc.
That contract represented only 4% of NPC's revenues, but Wal-Mart's huge transaction volume provided NPC with an economy of scale not easily replaced once lost, experts said.
"NPC is owned by a bank, and they want to see a return,." said Nicholas Ferrante, president and chief executive officer of Ferrante Financial Services Inc., Chatsworth, Calif. "They will probably sell, but will wait for the stock price to go up."
The sudden resignation of two senior executives has added fuel to the takeover speculation. Kurt S. Knipp, executive vice president for merchant card services, and Richard Alston, executive vice president for finance and corporate development, left the company to pursue other interests, NPC said Wednesday.
Industry insiders said the two executives, who joined the company two years ago, were fired by National City in a signal to stockholders that it is taking steps to improve NPC. They added that two other senior managers have stepped down.
Mr. Alston and Mr. Knipp "didn't fulfill the vision" said Paul Martaus, president of Martaus & Associates, Clearwater, Fla.
After losing Wal-Mart to First Data Resources, the pair "attempted to convert the organization from near total reliance" on large national accounts to smaller merchants, and they "were unable to do so."
"I see them as a perfect candidate for a merger," Mr. Martaus added.
According to Richard N. Speer, chairman and chief executive of Atlanta- based Speer & Associates, NPC still has a strong core business-processing card transactions for large national accounts, including all of the major airlines. The loss of Wal-Mart, he said, was "not a good thing, but it's been magnified out of proportion."
"Few (payment processor) stocks have been singled out for abuse, and this one has," he added
Other issues troubling NPC include a costly infrastructure and aging settlement systems, as well as an absence of terminal driving capacity, Mr. Martaus said.
As for potential buyers, Hackensack, N.J.-based First Data Corp., the largest transaction processor, has a long history of growing through acquisitions. Another candidate, Columbus, Ohio-based Banc One Corp., is currently acquiring First USA Bank Inc; both are large merchant processors in their own right.
Citicorp, which left the payment processing business several years ago, is believed to want to reenter the market, as several large banks have already done.
Citicorp "has the capital to do what it wants, and the large corporate relationships," Mr. Ferrante said. But NPC "won't be an easy sell" for National City.
