Fleetman Inc. has agreed to purchase Gascard Inc., bringing together two fleet management companies serving a total of 8,000 outlets in 46 states.

Under a letter of intent, Fleetman or a subsidiary of Fleetman, which is owned by the Reily Cos., would pay minority shareholders of Gascard, with about 18% of the fully diluted stock, 14.7 cents a share in cash, based upon a company valuation of $12 million.

Majority shareholders would get 12.3 cents a share in cash and subordinated notes. Fleetman thus would pay $8 million in cash at closing, plus $2 million through five-year, 5% subordinated notes held by seven of the majority shareholders.

New Orleans-based Fleetman owns Fuelman, a system that emphasizes management controls and processing services for commercial, government, and utility fleets. Gascard, based in Carlsbad, Calif., is both a licensor and transaction processor of a nationwide, card-activated fuel management system.

The deal will permit "a combination of services to our respective customers that is unparalleled in what has been a fragmented industry," said Fuelman chairman Kingsley McCallum.

The merger reflects the growing prominence of fleet management services and their commercial credit card component. Emboldened by growth in the market, executives are now looking to broaden product applications beyond fuel, the primary focus of their service, to relevant areas such as oil changes and car washes.

"Fleet management services are very lucrative," said David Robertson, president of The Nilson Report, an Oxnard, Calif.-based card industry newsletter. "The commercial trucking industry is growing, as are debit card programs."

Fleet credit cards issued by third-party companies generated $2.36 billion in volume last year, according to Nilson. Another $2.63 billion was attained through the fleet credit cards of gasoline and diesel marketers.

The newsletter found the highest volume - $6.5 billion - was generated through fleet debit cards issued to long-haul trucking firms by third-party card companies.

GE Capital, described by Mr. Robertson as a "titan" in this crowded industry, also provides fleet management services in the United States but does not see itself in direct competition with Gascard.

While a merged Gascard-Fleetman would have access to 8,000 outlets, it still would fall far short of Wright Express, its chief competitor, which currently reaches approximately 90,000 sites.

"We believe that these combined companies will be more attractive to more resellers, and more resellers will mean more sites," said Lindsey B. Holland, Gascard's president and chief executive. "We hope to add more sites, and reach states in which we don't already have a presence."

Despite the deficit in sites, Gascard sees itself as a viable choice because of what it sees as a superior operational approach.

"They have a great wealth of providers offering everything except great field management," said Mr. Holland. "Wright's controls are nonexistent," he said. "They go about things quite differently. They have focused on convenience, and while that's important, that's just one aspect. If you have access to 90,000 sites, but when you get there you don't know what to do, that's a problem."

Wright Express, a specialist in fleet credit cards and related information services, was acquired last year by SafeCard Services, the biggest provider of card registration services to banks and other issuers. Wright rejects Mr. Holland's characterization, citing its "exception reporting" as an example of hands-on customer service.

"We can highlight things that can help fleet managers do their job and save money," said Mike Dubyak, senior vice president and general manager at Wright Express. "Let's say a manager doesn't want his driver buying gas between 9 p.m. and 8 a.m., or in a certain area. We can highlight this kind of information and condense it so that it is readily available to him."

Said Mr. Robertson: "Wright Express has proven to be very adept in signing up outlets it needs and in selling services. They still have a competitive advantage."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.