GE Capital Services said Monday that it has signed an agreement to buy an equity interest in the smart card maker Gemplus.
The companies would not reveal the size or value of the stake but called it "significant."
The deal will team the largest producer of chip-embedded plastic cards, which is based in Gemenos, France, with the financial services subsidiary of the U.S.-based industrial giant General Electric Co.
GE Capital, a major issuer of private-label credit cards, appears to be placing its considerable prestige behind the emerging card technology. It did something similar last year with an equity interest in First Virtual Holdings, developer of an Internet payment system.
The Gemplus alliance "will help GE Capital to consolidate its position in financial services for consumers," said David Nissen, president and chief executive officer of GE Capital Global Consumer Finance, in a prepared statement.
The companies were not specific about their plans but said they would "work together to develop new products and services."
Gemplus, established by entrepreneurs in 1988, rang up $400 million of sales last year. The link to General Electric may give it a multinational- corporate connection to match those of its two principal competitors, Schlumberger and Bull, both industrial conglomerates in their own right.
GE Capital joins three Gemplus equity owners: the Quandt family of Germany, Singapore Technologies, and Dassault. The latter, a French terminal maker, announced a 9% holding this month.
Brigitte Baumann, Gemplus' president for the United States and Canada, said the company wants to diversify its sources of capital and get more of it from strategic partners as opposed to venture investors. She called GE Capital's move "a positive endorsement of the smart card industry and the role we play in it."
Larry Linden, a Woodbine, Md., consultant, suggested a synergy between GE Capital's "enormous volume of cards" and Gemplus' magnetic-stripe card facilities in Minneapolis, bought from DataCard Corp. in May 1995.
Mr. Linden is a former president of Malco Plastics, a U.S. card maker that competed with DataCard and is now owned by Gemplus competitor Schlumberger. He said GE Capital does its own embossing and mailing of about 30 million cards a year at a facility in Macon, Ga., but has no manufacturing capability. He said the two companies may consolidate their operations.
Noting the huge investments in the smart card business in recent years, Mr. Linden said the equity owners "are spreading their risks."