After months of courtship, two of the Northeast's biggest automated teller machine networks, York Cash Exchange and Yankee24, have agreed to combine operations.

According to network executives. NYCE, operated by the New York Switch Corp. in Hackensack, N.J.. and Yankee24, operated by Neni Corp., Wallingford, Conn., signed a letter of intent last Thursday to form a superregional network that would dominate the electronic banking market in New York State and New England.

A source close to the talks said the letter is so detailed that an eventual merger between the two networks is virtually guaranteed. "You would be amazed that it's a letter of intent and not a contract," the source said.

On a Par with Star, EPS

The postmerger network would consist of more than 13,000 automated teller machines owned by about 1,300 financial institutions. The network would also boast more than 33,000 point of sale terminals and more than 20 million cardholders.

In terms of number of ATMs, the new network would be in a virtual three-way tie for first place with Delaware-based Electronic Payment Systems Inc. and California's Star System

"This is a merger that's been in the works for a while," said Richard Speer, chairman of Speer & Associates, a consulting firm in Atlanta. "It's significant but not surprising."

Fleet Spurs Talks

Mr. Speer and others note that Yankee24 and NYCE have been in serious talks several times since March 1992, when Fleet Financial Group, one of New England's largest financial institutions, left Yankee24 to take an equity position in NYCE.

According to insiders at NYCE, merger talks were sidetracked in early 1993 as NYCE tried to fill the management void left by the December 1992 death of NYCE president David A. Huemer.

In recent months, though, NYCE's interim president, Gary Roboff, was able to work out an agreement that eased Yankee24 president Richard Yanak's concerns that his embers would cede too much control to the seven financial institutions that own NYCE.

Equity Based on Volume

NYCE's current owners are: Bank of New York Co., BayBanks Inc., Chase Manhattan Bank Corp., Chemical Banking Corp., Fleet Financial Group, Marine Midland Banks Inc., and National Westminster Bancorp.

The specific finances of the deal have yet to be worked out, but Mr. Yanak said Monday that several Yankee24 members will be given the opportunity to take an equity position in NYCE. The size of the equity position will be based on the number of transactions each institution brings to the new network, he said.

"This is not a conventional merger, where two organizations come together and adopt the operating rules and structure of one or the other," said Mr. Yanak. "In this case, we're really talking about a new network in which the best of both organizations is kept intact."

Technology Savings

For Yankee24, the most obvious benefit of merging with NYCE will come from the transaction processing side. Since NYCE owns its data center, Yankee24 will no longer have to rely on Deluxe Data Systems Inc.. Brown Deer, Wis. for its processing. NYCE uses Deluxe Data's software in its facility.

While Yankee24 benefits from the technology side, NYCE officials said they believe they are gaining some important expertise in dealing with its member financial institutions, many of which are community banks.

"Dick Yanak deserves a lot of credit for creating an organization that pays a lot of attention to its ownership," said Thomas Honey, executive vice president of marketing at NYCE.

The logo under which the new network will operate has yet to be determined. If one of the two network marks is to survive, most observers believe it will be NYCE, since the New York network handles more than four times the number of transactions as Yankee24.

But, given the regional connotations carried by both network marks, it is entirely possible that the new network could be given a whole new moniker.

The merger is expected to be finalized by the end of 1993.

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