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Eltna Corp., the manufacturing partner for Tranax Technologies Inc., has bought the off-premise automated teller machine maker.
The deal is the latest shakeup in the off-premise ATM market.
Nautilus Hyosung Inc., Tranax's former partner and now archrival, is scheduled to complete its purchase this month of Triton Systems of Delaware Inc. in Long Beach, Miss.
Nautilus Hyosung, a Seoul manufacturer, shipped 14,433 ATMs in 2007, making it the largest off-premise ATM maker. Triton shipped 10,454 units last year, making it second-largest, and Tranax rounded out the top three, shipping 9,000 machines in 2007. The off-premise ATM market is worth about $100 million per year, analysts say, and ATM owners replace about 30,000 machines annually.
However, the market is shrinking. Five years ago it was worth $150 million, but a price war erupted last year when Nautilus Hyosung cut prices by as much as 40% to gain market share and other companies were forced to follow suit. Off-premise ATMs typically sell for $2,500 to $3,000.
The purchase of Tranax by Eltna, also of Seoul, which closed this month, will extend the price war, according to Leon Majors, the president of the Salisbury, Md., research firm Phoenix ESP Payments Research Group. Eltna did not disclose the deal price.
"We will see how badly they [Eltna] want to fight in this market," Mr. Majors said. "We could see more blood in the water."
However, Mr. Majors also warned that the price war could be making it hard for the companies to make money, though Nautilus Hyosung has said it is doing well. Opinions vary on how much of the off-premise market a combined Nautilus Hyosung and Triton would control; estimates range from 65% to 85%.
The purchase of Tranax gives it a stronger financial footing and access to better designs to compete with Nautilus Hyosung, said Jeffrey Lee, Tranax's director of product management. "Eltna is involved in ATM design and manufacturing for other companies, but it never has had a presence in the U.S. Tranax gives it a U.S. presence."
The fact of the sale indicates the off-premise ATM market is healthy, according to executives at Triton and Nautilus Hyosung America Inc., a Coppell, Tex., subsidiary of Nautilus Hyosung.
"The purchase of Tranax is further evidence of a healthy amount of competition in the off-premise ATM market, which will ensure better products and pricing for customers," Carlos Siewczynski, the vice president of Nautilus Hyosung America's North American retail self-service division, wrote in an e-mail.
James Phillips, Triton's director of North American sales, agreed, saying, "Anything that increases competition and ensures that prices remain competitive will be good for ATM distributors, merchants, and the consumer."
Eltna is part of a privately held holding company, with units that produce ATM systems, components, imaging, design, and manufacturing. Eltna has made Tranax machines and supplied replacement parts for the Newark company since Tranax's 2006 split with Nautilus Hyosung; Tranax began distributing Nautilus ATMs in the United States in 1998, but the companies ended their relationship in January 2007 after a strategy dispute. Tranax wanted to pursue the kiosk market, but Nautilus wanted to focus on ATMs.
"We are very pleased to announce the merger of Tranax into the Eltna group of companies," Hansup Kwon, Tranax's co-founder, president, and CEO, said in a press release. "Joining forces with Eltna enables us to form a strong, new, vertically integrated company with direct manufacturing and best-in-class ATM components and systems. The new entity will [retain] the Tranax name in order to leverage the company's strong brand name and reputation."
Won-Gee Lee, Eltna's chief executive, is to become Tranax's CEO after a transition period.
Tranax also plans to replace its chief financial officer with someone chosen by Eltna. Mr. Kwon joined Tranax's board of directors, and his wife, Heemook Kwon, Tranax's co-founder and vice president of corporate development, is to stay in that role and be a Tranax director.
"We believe the new, vertically integrated company - with direct manufacturing, product know-how, and the depth of market experience that Tranax brings - will create a strong new Tranax," Mr. Lee said in the release.
