After losing millions of dollars and market share, Tidel Technologies Inc. is being sold to a rival, NCR Corp.
NCR is acquiring Tidel's automated teller machine business for about $10.1 million and has agreed to take over certain liabilities related to the business, according to a Securities and Exchange Commission filing by Tidel.
The deal, announced Friday by the companies, punctuates an ATM merchant-sales debacle that ensnared both manufacturers in 2001.
That year Credit Card Center, an independent sales organization based in Philadelphia, defaulted on millions of dollars to NCR and Tidel as well as to hundreds of merchants where it had placed ATMs.
NCR, which is less dependent on the nonbank ATM business than the smaller Tidel, was able to weather the storm.
But Tidel has sustained more than financial losses lately. In December the Houston company's chairman and chief executive, James T. Rash, died.
Mr. Rash had been at the helm since February 1989, and the company has yet to appoint a permanent successor. Chief operating officer Mark K. Levenick is the interim CEO.
"Tidel has been through a lot," said Leon Majors, the president of ESP Consulting Group in Salisbury, Md.
It lost $26.7 million of inventory to Credit Card Center in 2001, which could have put Tidel out of business. But it withstood a securities class action that was finally settled in July.
The suit, however, cost an additional $3 million in cash and 2 million shares, or about 10% of its stock. Tidel's stock plunged as a result of Credit Card Center's default, and it was delisted from the Nasdaq in 2003. The company was selling at 36 cents on the Pink Sheets.
Moreover, Tidel has yet to collect the $26 million it won in a judgment in 2002 against Credit Card Center's CEO. And it has recovered only a portion of the lost inventory.
Normally a hit like this would have put an end to such a small company, Mr. Majors said, but, "Their investors just wanted to keep them open."
Tidel never recovered its No. 2 position in the merchant ATM business, however. According to ATM&Debit News, a sister publication of American Banker, Tidel was the fourth-largest manufacturer in the merchant ATM field as of 2003, with 2,868 ATMs shipped that year, the latest for which ATM&Debit News had data available.
In 2000, at its height, Tidel shipped 12,000 ATMs, but it was not turning a profit on them, said David Gosnell, the editor of ATM&Debit News.
NCR, of Dayton, Ohio, lost $39 million after Credit Card Center defaulted and went into bankruptcy. The $6 billion asset-company shipped 9,400 ATMs in 2003, according to Mr. Gosnell.
Jeff Dafler, a spokesman for NCR, said the Tidel deal, which is expected to close in the fourth quarter, will "strengthen our position as the provider of the widest range of self-service solutions."
"The combination of Tidel's portfolio and our global presence provides attractive opportunities," Mr. Dafler said.
Mr. Majors noted that though NCR has competed in the merchant business, it has mostly stayed with higher-end merchants. But it has not caught on with mom-and-pop-type stores, he said, because it "really didn't have a bare-bones, bottom-of-the-market offering."
Tidel's machines, which cost $3,000 to $5,000, should give NCR entry to that market, he said.
The deal might be most helpful for NCR internationally, Mr. Majors said. The U.S. merchant market is becoming saturated, but the international merchant market is wide open. In recent years Tidel has entered the United Kingdom and Australia.
Mr. Levenick was not available for comment, but Matt Johnson, a vice president in charge of marketing for Tidel, said that having NCR behind Tidel "makes a strong proposition for us in the marketplace."
In its SEC filing Friday, Tidel said that NCR expects to hire 50% of Tidel's employees, including two executives. Mr. Dafler would not say if NCR would keep the Tidel brand.
The filing also noted that Tidel plans to sell its timed-access cash controller business, which limits the amount of money that store clerks can take out of a store safe at any given time.
The main reason a fourth-quarter closing was set for the NCR deal is that Tidel is behind in its 10K filings with the SEC. (It has not filed financials for 2003 and 2004. In 2002 it had $19.9 million in assets.) Tidel needs to be current no later than July 31 according to Friday's 8K filing, for shareholders to vote on the deal.
"That's the goal, to have everything in line with the financials so there can be a shareholder vote by the end of the year," Mr. Johnson said.
