Groupe Ingenico, a Paris-based manufacturer of terminals for card systems, is acquiring payment terminal businesses from Groupe Bull.
Ingenico says the deal with Bull, announced in December and scheduled to close in February - combined with a deal with De La Rue Card Systems, which closed in March 1998 - would make it the second-largest payment terminals and systems vendor in the world. Bull, of Louveciennes, France, would become Ingenico's largest shareholder, with 31% equity.
Moreover, Ingenico executives say they would be poised to compete against the two American giants of the industry, market leader Verifone Inc. and its top rival, Hypercom Corp.
"These agreements with Bull and De La Rue give Ingenico true leadership coverage of all world markets outside North America," said Jean-Jacques Poutrel, chairman and chief executive officer of Groupe Ingenico. "Filling this last gap thus becomes de facto our next challenge, and we will take it up without delay."
Ingenico's deal with Bull involves both an acquisition and a strategic alliance for marketing each other's products in various countries.
"It will be beneficial for Bull, who becomes Ingenico's prime partner, and for Ingenico, who becomes a world leader in the payment terminals market," said Guy de Panafieu, chairman of Groupe Bull.
The transaction last year with London-based De La Rue also bolstered Ingenico's marketing powers, Mr. Poutrel said.
Ingenico has been busy making deals and cultivating partners. Last year it took a 40% stake in Veron SPA of Italy, a producer of smart cards and electronic payment systems.
At the end of 1996, Ingenico entered the American market through an alliance with International Verifact Inc. of Toronto, which has since merged with a former rival, Checkmate Electronics Inc. of Roswell, Ga.
"We are building a new company" that is both a "local supplier" and "a global provider," said Gerard Compain, managing director of Ingenico. "We will have the global technology, global image-but local services and local adaptation."
According to The Nilson Report, an industry newsletter, Verifone shipped 960,810 payment terminal units in 1997, and second-place Hypercom shipped 501,600. Ingenico, Bull, and De La Rue shipped a combined 507,150 that year.
But the numbers belie some of the challenges and realities Ingenico faces against the larger American companies.
"There are no European-based manufacturers that have the economies of scale to compete against Hypercom or Verifone," said David Robertson, president of The Nilson Report, Oxnard, Calif. "They won't have the efficiencies of the single brand strategy or a unified research and development that will generate the kinds of economies need to generate profits."
Integration of the euro will create demand for new terminals among European retailers, observers say, but will also complicate the manufacturing requirements. The common currency has not eliminated local laws and technology requirements that hamper a terminal maker's ability to do mass production.
"It is only through consolidation and volume that you can achieve the lower unit costs they really need," said Stanley Anderson, president of Anderson & Associates, Arvada, Colo.
