Gemplus International SA and Axalto Holding NV, the world’s largest makers of smart cards, agreed to combine in a $1.1 billion stock swap to trim costs as prices for their products slide.
Gemplus owners would hold 55.4% of Gemalto NV. The merged company would control 35% to 40% of the markets for banking cards and SIM cards that power mobile phones, Gemplus chief executive Alex Mandl and Axalto CEO Olivier Piou said at a press meeting Wednesday in Paris.
Jean-Edouard Reymond, a fund manager at Union Bancaire Privee in Paris, which oversees $63 billion of assets, said the new entity will be “a heavyweight right away that will be able to take market share.” By merging, the two companies will get “better chances of having greater pricing power than their competitors,” he said.
Gemplus shareholders, including the buyout firm Texas Pacific Group and Germany’s Quandt family, would swap 25 of their Gemplus shares for two shares in Axalto, of Montrouge, France. The swap is set to be completed in mid-2006.
Mr. Mandl would become executive chairman of Gemalto and Mr. Piou would keep his title at the new company.
The companies are combining as demand increases for smart cards amid falling prices because of Chinese competitors including Datang Telecom Technology Co. and Watchdata Technologies Ltd.
“We have little doubt that we’ll be able to convince the regulators” to approve the merger. Mr. Mandl said. “We know this is a highly competitive business,” but “we have very powerful customers. Market power will not be defined by market share.”
Texas Pacific holds 25.3% of Gemplus and the Quandt family has 18.4%. The U.S. buyout firm would control 14% of Gemalto, Mr. Mandl said.
