VeriFone Systems Inc. confirmed in a regulatory filing Wednesday that it plans to divest Hypercom Corp.'s U.S. business after buying its rival terminal maker.
VeriFone, of San Jose, Calif., announced its all-stock deal for Hypercom in November. It was valued at $485 million, including net debt that VeriFone would assume, and is set to close in the second half of 2011. VeriFone said last year that it was considering spinning off the Scottsdale, Ariz., company's U.S. business in order to avoid antitrust issues.
Now VeriFone's strategy is clear. "Hypercom's U.S. business … is expected to be disposed of in connection to the merger," VeriFone, which bought Hypercom for its holdings in continental Europe, said in the Securities and Exchange Commission filing.
VeriFone's actions could have long-term consequences, said Wedbush Morgan analyst Gil B. Luria. "Disposing of the U.S. business makes [the merger] more complicated," he said. "You are going to have two companies selling the same product line that lays out the same framework."
Luria said VeriFone could continue sales of Hypercom's product line in the U.S. for at least several years after the company finds a buyer. He said VeriFone is likely already speaking to regulators.
"That's why the merger date is so far out," Luria said. "For them to announce a deal and say it's going to be done in the second half of 2011, that's a very long time frame."
VeriFone also outlined its plans for Hypercom's current chief executive, Philippe Tartavull. Hypercom renewed Tartavull's contract on Dec. 30, 2009, extending it through Dec. 31, 2012. Tartavull joined Hypercom in February 2007 as president and in December that year added CEO to his title.
As a result of the merger, Tartavull would receive $675,000, roughly 18 months of pay, until he is let go at the end of 2012. He would receive more money if the merger is completed before the end of June. Tartavull's total compensation, which includes "reasonable" moving expenses and health insurance, would reach about $5 million.
Other Hypercom executives would receive similar deals.
A VeriFone spokesman would not comment.
A Hypercom spokesman did not immediately reply to a request for an interview.