POS and card-reader vendor VeriFone has reportedly expressed interested in buying up the assets of financially troubled biometrics provider Pay By Touch, even though VeriFone is in some financial hot water of its own following a disclosure last week that it would have to restate results from earlier in the year. VeriFone, according to a report by BusinessWeek, has “quietly expressed” interest in Pay By Touch, which is mired in an involuntary bankruptcy proceeding and in the middle of a wrestling match between founder and Chairman John Rogers and some of its lead investors for control of the company.
According to BusinessWeek, VeriFone’s interest was indicated in a letter from Pay By Touch investors, detailing how VeriFone executives approached hedge fund investor Plainfield Asset Management. The Nov. 5 letter was included in bankruptcy court records for the San Francisco biometric POS company (which was incorporated in 2002 as Solidus Networks). That letter was prior to a Dec. 3 announcement by VeriFone that accounting errors totaling $30 million would force it to restate earnings from the first three fiscal quarters of FY 2007 (which began Nov. 1, 2006). VeriFone also plans to delay its fourth-quarter earnings report – leaving in doubt perhaps its current interest or ability to pull off an acquisition.
The battle between the Pay By Touch founder and hedge fund investor Plainfield began in October when, according to court documents, the fund’s executives declared Pay By Touch in default of a $50 million loan after failing to deliver 2005 audited financial results. Plainfield and Rogers have been in dispute over control over the board of directors (Rogers fired two directors and another resigned by mid-October, before Plainfield reinstated them). Before that matter was resolved, four Pay By Touch employees filed to put the company into involuntary bankruptcy on Oct. 31.
Although Pay By Touch’s niche is the fingerprint-based payment system deployed at major grocery store chains like Jewel-Osco and Piggly Wiggly, it has branched into targeted marketing and loyalty programs in the past year to improve cash flow from the reportedly slow adoption of fingerprint payments by consumers.
