By proposing to combine two of the world's three largest makers of payment terminals, VeriFone Systems Inc.'s hostile bid for Hypercom Inc. appears to raise antitrust issues.

But VeriFone said it views Hypercom's European operations as the main attraction. Doug Bergeron, VeriFone's chief executive, said late Wednesday he would be willing to spin off the target's U.S. business if that were required to address regulatory concerns and expedite a closing.

Darrin Peller, an analyst at Barclays Capital, estimated in a research note Thursday that, if it bought Hypercom but did not divest the target's U.S. business, VeriFone would end up with more than 60% of the U.S. market.

"Verifone will not be able to buy Hypercom as it is, intact," said Gil B. Luria, an analyst at Wedbush Morgan. "Their U.S. business will have to be spun off because VeriFone has overwhelming share in the U.S."

The discussion could be academic, though, because Hypercom's board unanimously rejected the unsolicited bid Thursday, saying the $5.25 per share offer undervalued the company (despite a 24.11% premium to its closing price before the bid was announced). Two years ago, Hypercom fended off an unsolicited bid from Ingenico SA of France.

Hypercom and VeriFone declined to make executives available to discuss the situation Thursday.

Peller wrote that Ingenico controls about 30% of the global terminal market, compared to VeriFone's 25% and Hypercom's 15%.

Adil Moussa, an analyst at Aite Group, said the U.S. business is the less interesting part of Hypercom because domestic growth in the terminal market is slow and likely to stay so for some time.

"Once you get a machine, there is no desire to change that terminal anytime soon," he said. "And the new terminals are not flying off the shelves because merchants that are coming into the market are very scarce."

But terminal sales are brisk in emerging markets, where payment card acceptance is rising quickly, and in countries that are shifting to the EMV Integrated Circuit Card Specifications, for which merchants must upgrade their infrastructure.

Brian Riley, a research director for bank cards at TowerGroup, said that since VeriFone is weak in continental Europe, "there is no question that this [deal] would create a powerhouse in an industry that has a lot of high barriers to entry," even if it were to spin off Hypercom's U.S. business.

Hypercom, a Scottsdale, Ariz., company, said VeriFone's offer "significantly undervalues the company and its future prospects." The target called its suitor's proposal "opportunistic and intended to disrupt [Hypercom's] business, which has successfully taken market share from VeriFone in several markets."

Analysts agreed that the offer price is too low. Luria said he thinks Hypercom is worth more than $5.25 a share.

"They've made a lot of nice progress over the last year, year and a half, and they think the progress that they have made increases their value," he said. "They believe that they deserve more of a chance to do more of what they've been doing."

Luria raised his target price on Hypercom to $6 in a research note to investors.

Still, Hypercom's shares have been trading in the $3 to $5 range for much of this year and have not cracked $6 since 2007.

That is well below the high teens the stock was valued at in the early 2000s but well up from late 2008, when it traded at less than $1.

Hypercom shares closed Wednesday at $4.23, before VeriFone, a San Jose company, announced its offer, but climbed 53.66%, to $6.50, at Thursday's close.

George Sutton, an analyst at Craig-Hallum Capital Group, said in a research note that he estimates Hypercom shares are worth $6.75 and that VeriFone would have to offer at least $6.25 to get the deal done.

In February 2008, Ingenico offered $6.25 per share for Hypercom, whose board also said that bid undervalued the company. Though Ingenico initially pursued a transaction, its push fell apart after Hypercom bought another company, the e-transactions unit of Thales SA.

Luria said that Hypercom could have trouble justifying its decision to shareholders if it gets a higher offer.

"At $5.25 I don't expect any pressure" from shareholders, said Luria. "At $6 and above, those are stock levels that Hypercom will take at least a year to get to. And, at that point, well, if they can get that today, as opposed to a year or two from now, [investors] would like to get that today."

TowerGroup's Riley said Hypercom's initial rejection could just be a play to raise the price.

"If you make an offer to buy, unless" the target company is "a dog, I'm going to turn it down," he said.

VeriFone said the offer was a 69% premium over Hypercom's average share price for the 30 trading days before its offer, and Bergeron said he planned to pursue a deal despite Hypercom's rejection. Yahoo! Finance says Hypercom has 54.02 million shares outstanding, valuing VeriFone's bid at $283.61 million.