A year of financial and operational issues had many on Wall Street wondering if the transaction processor Intercept Inc. was destined to be broken up and sold off in parts.
Chairman and chief executive John W. Collins had a simple response to that. His plan: Keep the company together by taking it private.
So when InterCept announced Friday that Mr. Collins was abandoning an effort to buy out the company after failing to obtain necessary financing, it once again raised questions about where the company might be headed. Not surprisingly, the idea of breaking it up resurfaced.
Andrew Jeffrey, an analyst at Needham & Co. Inc., singled out InterCept's merchant processing unit as one that had to be scrapped if the company was to succeed on its own as a stand-alone processor focused on serving financial institutions, or become a viable acquisition target.
"The best decision management can make is the explicit, immediate exit of the merchant business," Mr. Jeffrey said. "Best-case scenario would be to sell it." But he also offered this advice: "Just shut it."
The analyst said he was not surprised that Mr. Collins was unable to find financing and take the company private.
"We've been saying since October, when we downgraded the company and they missed their numbers, that it would be difficult for John to pull together financial backers," Mr. Jeffrey said. "The announcement today validates that point."
The Norcross, Ga., company said Friday that "several third parties" had expressed interest in financing the deal, but none that would make the deal financially viable.
"After consultation with possible financing sources for a potential transaction, I determined that I could not formulate an offer that I believed would be in the best interest of the shareholders of InterCept, and have therefore decided not to present an offer to the special committee," Mr. Collins said in the announcement. "With that decision made, I will be available to the committee in its efforts to evaluate the indications of interest it has received."
Neither Mr. Collins nor other senior management at InterCept would comment beyond the press release.
Among customers the reaction was more curiosity than concern.
George Drew, an executive vice president and the chief financial officer at American Bancorp in Edmond, Okla., said he was not concerned about continued service from InterCept. But he said that the lack of funding for Mr. Collins' plans was something the $250 million-asset bank holding company would look at carefully.
"The obvious question is why did the effort fail?" Mr. Drew said in an interview. "Were there not enough people interested in the company, or is there some underlying issue that prevented [Mr. Collins] from accomplishing his goal?"
American Bancorp uses InterCept for its check processing, and still intends to pursue an upgrade of its processing and core systems it had planned with InterCept for 2004, Mr. Drew said.
"I don't anticipate that this will have a dramatic effect on our service level," he said. "But they can't find anyone that wants to invest in them. I think it's something we'll check into."
Craig Apatov, the managing director of marketing and business development at GMAC Bank in Wilmington, Del., which announced a partnership in September to offer payment services to GMAC clients with InterCept, said he had no comment on Mr. Collins' announcement. He did say he saw no reason to believe this would affect the relationship between the two companies.
GMAC Bank is "excited" about the partnership and thinks InterCept "is a great company," Mr. Apatov said. "They are well positioned to do what we want to do in the payments space."
The partnership with GMAC Bank, a subsidiary of General Motors Corp.'s GMAC Residential Holding Corp., was billed as a boon to InterCept's fledgling merchant processing unit - a division that analysts say could be the root of InterCept's problems.
In just the third quarter the merchant unit's revenues fell 28.5% year over year, to $14.6 million. The company also reported a $1 million shortfall caused by customer attrition; $800,000 of charges from a contract dispute; and $400,000 of bank-assessment charges, which kick in when transaction volumes are not high enough.
Shares of InterCept fell 5.44% Friday, to $9.90.
