Verifone Inc., the once-dominant payment terminal manufacturer that has slid lately as its competitors have climbed, will have its third owner in less than 14 months under a deal announced Tuesday by its investment firm owner, Gores Technology Group.
Last spring Gores bought Verifone in what was called a bargain from Hewlett-Packard Co., which had paid more than $1.2 billion in 1997 for the then-independent company. Now, GTCR Golder Rauner LLC, a private equity investment firm in Chicago, is to be the majority owner.
Gores, of Santa Clara, Calif., would retain a minority stake under the deal, which is expected to close soon. It would not say how much GTCR Golder Rauner is paying. Gores group president Doug Bergeron, who has been running Verifone, would get an equity stake in Verifone and a five-year contract to continue running the company.
Stuart Taylor, the director of emerging markets and business development at Verifone, said GTRC has “worked with us for six months to identify growth opportunities in this industry. There are some obvious synergies where we can have an optimized performance working with others.”
Unlike Gores, GTCR already has several payment and terminal-oriented companies in its stable. It owns Genpass Inc., an automated teller machine processor; International Check Services, a check authorizing service; Transaction Network Services Inc., which provides data communications to processing companies; and TransFirst Holdings Inc., a merchant processor.
“They are in this for the long haul,” Mr. Taylor said. “They can help us expand our footprint.”
Christopher S. Alexander, the president and chief executive officer of Phoenix-based Hypercom, Verifone’s top domestic rival, said, “We know Bruce Rauner at GTCR and believe that Verifone has found a good home.”
Verifone, also of Santa Clara, ranked third last year in terminal shipments in a vendor survey by Card Technology, a Thomson Media publication (Thomson Media also publishes American Banker). The French manufacturer Ingenico led the field with 1.5 million terminal sales, up 18.4% from 2000, and Hypercom came in second with 1.1 million, up 2.6%. Verifone had 976,000 sales, up 1.1%. The survey results appear in the June issue of Card Technology.
When Gores bought Verifone, it had no timetable for selling the business, it says.
“What happened here is the company turned around a lot faster than anybody expected,” said William Atkinson, the senior vice president of business development of Verifone. “We got to a point where we are profitable, back to growing, and now it is a case of attracting more investment to get us to the next stage in rebirth.”
Mr. Atkinson pointed out that Verifone was profitable 100 days after Gores bought it from Hewlett-Packard. Most of that profitability was gained by cutting down on research and development, selling off a peripheral part of the business, and reducing staff in what Mr. Bergeron called a “getting back to basics” philosophy. Its cost reductions did little to improve its market share, however.
Mr. Bergeron has said that acquiring smaller terminal manufacturers is an important strategy for Verifone. Mr. Taylor suggests that GTCR Rauner Golder may provide the capital, calling it “a financial sponsor to our growth plans.”
