An acquisition of the ATM businesses of EDC Holding Co. LLC would do as much to boost the quality of Cardtronics Inc.’s ATMs as it would to boost its quantity, observers say.
Cardtronics announced its plans to buy the EDC unit on June 21 (
The agreement, expected to close in the fall pending regulatory approvals, would add 3,700 ATMs to the Cardtronics fleet. The company would own or operate about 41,000 ATMs after buying the EDC business.
Cardtronics agreed to pay $145 million for the businesses, to be adjusted for working capital upon closing.
The Houston-based ATM independent sales organization has dabbled with running on-screen ads in the United Kingdom, but it was more focused on retail banks and cobranding initiatives in the U.S. By contrast, EDC, of Walnut Creek, Calif., has been more forward-thinking about offers through its machines, experts said.
“They have their ideas about innovation, and we hope to germinate those ideas into seeds,” said Steven A. Rathgaber, Cardtronics chief executive, in a June 22 interview. “It’s a pretty basic acquisition for all the right reasons; … this is essentially a mini-Cardtronics.”
The purchase would help Cardtronics move past simple ATM transactions, said Christopher Shutler, an analyst at William Blair & Co. LLC. Cardtronics already is working with 7-Eleven Inc. convenience stores on coupons.
“I know that, after speaking with management, it sounds like EDC has been working on various innovations,” Shutler said. “The CEO’s primarily focus right now is trying to create an ecosystem in which they can help merchants, financial institutions and themselves.”
That bodes well for Cardtronics, which is trying to grow by adding services instead of just increasing its number of ATMs, said Deutsche Bank analyst Christopher Mammone.
Alpine Investors LP, the private-equity firm that owns EDC, approached Cardtronics several months ago, Rathgaber said.
The deal would increase the ATM ISO’s hold on convenience stores and give it agreements with three new retail banking clients–Fifth Third Bancorp, Citizens Financial Group Inc. and Bank of Montreal’s Harris Bank, according to Cardtronics.
The acquisition also would give Cardtronics an additional 60 financial-services kiosks, primarily used for bill-payment. “That’s a nice roster to manage,” said Rathgaber.
Analysts say that they don not expect regulators to resist the acquisition.
“I would be highly surprised to see regulatory hurdles given the fragmented nature of the market,” said Michael Saloio, an analyst with Sidoti & Co. in New York. “We like the deal, that’s basically the gist.”
Going forward, Rathgaber said he always is looking for acquisitions that would bolster his company’s presence overseas. “[But] I struggle a little bit more with the overseas [opportunity], just because the markets there are a little smaller,” he said.
By midday Wednesday, Cardtronics shares were up 2.66%, to $21.96.
What do you think about this? Send us your feedback.
