Harland Acquires Liberty Enterprises

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In a marriage reminiscent of television's "The Brady Bunch," John H. Harland Co. said last week it has agreed to merge with rival check printer Liberty Enterprises, bringing under one roof the cartoon characters from Peanuts, as well as Batman, Superman and the Charlie Brown, all staples of credit union checking accounts provided by the two companies.

The merger will combine two of the biggest credit union outsourcers and eliminate one more competitor in the rapidly declining market for check printing.

"Our intention is to be the last check printer standing," said John Heald, president of Harland's Printed Products Division, of the declining number of printers serving financial institutions, a list that now includes just Deluxe and Clarke American, along with Harland.

"Both of us are facing a declining checks market and both of us came to the same conclusion; we needed to go beyond the traditional market for checks and move on to other products and services to help each other grow," said Heald. The Liberty customer base, which includes 5,400 credit unions and almost 500 community banks, as well as the Liberty name will help Harland do that for its non-check business, he added.

"Adding our volumes together makes for good economies of scale," said Stan Hollen, CEO of Liberty, which is based in the Mounds View, Minn. He noted that the market for printed checks is declining by as much as 5% a year, by units, being replaced by electronic transactions.

Liberty, which has diversified in recent years into Internet services and marketing through acquisitions of Cavion and MyDAS Marketing, represents new opportunities for Harland, as it seeks to reduce reliance on the check business, which still provides 75% of company revenues. Harland, according to Heald, sees the Liberty deal as a new opportunity to cross-sell to credit unions, particularly the 1,200 credit union customers of its ULTRADATA core processing business. "This gives those Liberty customers better access to ULTRADATA," he said.

"This is all about creating more products and services for the credit union market," said Heald.

The $160-million deal must still undergo antitrust review by the U.S. Justice Department, which is expected to take as long as 60 days. Hollen said he doesn't expect the antitrust review to be an impediment to the deal.

Heald emphasized those areas where the companies don't overlap, stressing the new opportunities for Harland. "They're (Liberty) strong in small- and medium-sized credit unions, we're stronger in larger-sized credit unions," he said. "There's very little in the way of overlap."

The 700 Liberty employees will benefit immediately from the Harland purchase price because employees own a little more than 18% of the closely held company's stock through an employee stock ownership plan. That means as much as $30 million will accrue to employees. The remainder of the company is owned by company founder David Copham and his family.

"There are so many similarities between the two companies," insisted Heald. "Dave Copham is in many ways a modern-day John Harland, both put a premium on their relationships with customers and employees. "This is a good opportunity for both companies."

Hollen also stressed the expanded opportunities for both Liberty employees, who will now be working for a bigger, publicly traded company, and for credit union customers.

"It's very important that they (credit union customers) know that they'll be dealing with the same customer service reps, the same sales people will be in place," Hollen said. "It's going to be business as usual. It will not be a negative impact on them, at all."

Hollen, who took over Liberty three years ago after serving as CEO of The Golden 1 CU, said he has not decided whether he will stay on after the merger.

Heald said it was too early to discuss areas where the separate operations will be consolidated.

"Any combination like this has opportunities for cost savings," he stated. But the details of the combination will be worked out between representatives of both companies over the next few months, he added.

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