Stepping up competition in the crowded market for check processing systems, Banctec Inc. has moved to acquire a smaller supplier, Recognition International Inc.
The deal, worth over $180 million, is expected to help Dallas-based Banctec compete for business from the shrinking number of check processors.
Stanley E. Miltko, a senior vice president at of Exton, Pa.-based Littlewood, Shain & Co., predicted the acquisition would accelerate the delivery of image-based check systems, widely considered the future of the industry.
Such systems save money because it's cheaper to process digitized pictures of checks than the checks themselves.
Grahame N. Clark Jr., Banctec's chairman and chief executive officer, said savings from the acquisition "should enhance our ability to create new products." Mr. Clark would head the merged organization.
Recognition Equipment's revenues are about 40% those of Banctec; in total, the two companies brought in over $500 million last year. Their merger awaits shareholder and regulatory approval.
Experts said it is difficult to predict how the deal would affect pricing in the industry.
According to Tower Group, a bank technology consulting firm based in Wellesley, Mass., competition among check processing equipment providers is tough.
International Business Machines Corp. dominates the market for high speed reader-sorters, with Unisys Corp., and AT&T Global Information Solutions giving chase.
However, with no clear winner in the image market, Banctec and Recognition - longtime suppliers of low-speed systems that appeal mainly to community banks - may be able to make inroads with larger institutions over the next few years.
Mr. Miltko said that consolidation among image providers may develop in the coming year, as the market for item processing systems heats up.
The merger would bring a wider product line and more substantial support services to the companies' 4,500 financial industry customers, Mr. Clark said.
He noted that the deal is a continuation of Banctec's strategy to grow by acquisition.
The company recently acquired two firms that have helped it to expand its product line: ImageSolve International Ltd., based in the United Kingdom, and Terminal Data Corp. of Moorpark, Calif.
Though Banctec and Dallas-based Recognition Equipment offer many similar products, Robert Vanourek, president and chief executive officer of Recognition, said the two companies would complement one another in several areas.
For example, Banctec will be able to expand its presence internationally through Recognition's established operations in Japan and Canada. Recognition, in turn, will benefit from Banctec's large U.K. operation.
Banctec will also be able to expand its workflow offerings with Recognition's Plexus XDP image and workflow software.