IVI Checkmate Corp. of Atlanta has announced the purchase of DataCard Corp.'s financial services division.
IVI Checkmate, third in the point of sale terminal market behind Hewlett-Packard Co.'s Verifone subsidiary and Hypercom Corp., said it completed the acquisition Tuesday of DataCard's Jigsaw product line, which appeals to the petroleum convenience store market and other small retail outlets.
The sale was valued at $8 million in convertible preferred stock and warrants for common stock.
IVI Checkmate, a leader in debit terminals for large retailers with multiple checkout lanes, said the deal will help it broaden its reach.
The acquisition "accelerates our entry into the small retail business and travel and entertainment markets," said Barry Thomson, president and chief executive officer of IVI Checkmate.
Days before announcing the agreement in mid-April, Minneapolis-based DataCard announced a reorganization that divided its three core business units into separate companies. The company specializes in card manufacturing, identity systems, and hospital patient identification.
DataCard said it had been shopping its terminal unit for more than a year. With industry consolidation and "fierce competition," the company had little choice but to seek a buyer, said John Mamalakis, president of the financial systems unit.
"I didn't have enough revenue to develop new products and invest in research and development," Mr. Mamalakis said. Now "we are positioned to leverage IVI Checkmate's large-volume production and procurement capabilities."
IVI Checkmate is a product of consolidation in the POS terminal business. It was formed in 1998 by the merger of International Verifact Inc. of Toronto and Checkmate Electronics Inc. of Atlanta.
"As the consolidation continues-and the big guys get to be seriously big-all the niche players are really just playing a waiting game," said David Robertson, president of The Nilson Report, an industry newsletter based in Oxnard, Calif. "You really need to be much more of a full-service supplier of terminals and support."
To round out its services, IVI Checkmate has made other acquisitions. Last year it acquired Plourde Computer Services Inc. of Dublin, Calif., a software vendor to such clients as Safeway, Kmart, Food Lion, and Eckerd Drug. It also bought Debitek Holding Ltd., a smart card and magnetic-stripe payment system developer in Chattanooga, Tenn.
"Now our product line lets us get in the value chain at different levels," said John J. Neubert, executive vice president and chief financial officer of IVI Checkmate.
It still faces the challenge of realizing post-merger economies of scale, said Mr. Robertson.
"You've got good executives up in Canada who know what they are doing, and you've got executives in Atlanta who know what they are doing," Mr. Robertson said. "It remains to be seen if (the company) has a plan to go mass market."
To get there, the company is betting on eN-Touch 1000, a new terminal with a touch screen. But shipments scheduled for the first quarter were delayed, and IVI Checkmate's stock price tumbled to a low of $3 on April 7, from $7 on Jan. 22. The company said it hopes to start shipping in the second quarter.
One observer said despite the snag, the purchase of DataCard's business is a good omen.
"It is a positive sign to see them go ahead with this transaction," said Ramkrishna P. Kasargod, equity analyst at Morgan Keegan & Co. of Memphis. "It must indicate that they feel that the problem with the terminal is under control."