Popeye would join forces with Charlie Brown in a check-printing deal announced Tuesday: John H. Harland Co. is buying Liberty Enterprises Inc. for $160 million.
Many observers say this type of consolidation is inevitable in the check-printing market, because the use of paper checks in this country is falling by 5% to 6% a year.
The two companies both have broad licensing portfolios for creating specialized checks. Liberty's checks feature such characters as Superman, Batman, the Trix Rabbit, and the famed spinach-eating sailor. Harland's cast includes Peanuts characters and the M&M's "spokescandies."
Stan Hollen, the president and chief executive at Liberty, said consumer demand for checks with cartoon characters, sports teams, and kittens remains strong.
Analysts say offering checks with pop-culture characters is an important business for printers.
"People seem to love these specialized checks, and Liberty is very good" at filling the demand, said Robert Hunt, a senior analyst at TowerGroup Inc., the Needham, Mass., unit of MasterCard International.
Though consumers are ordering fewer basic checks, custom checks are more expensive than regular ones, Mr. Hunt said. "You can offset some of the lost revenue through the use of specialized checks. It's marketing, and I think it's good marketing."
Alenka Grealish, who manages the banking group at the Boston market research firm Celent Communications LLC, said that checks with licensed characters will probably remain a valuable source of revenue. "In the paper world, those are the last ones to go."
John Heald, the president of Harland's check-printing division, Harland Printed Products, said in an interview that his parent company would pay $160 million in cash for Liberty. The deal is expected to close by early June, and Harland expects the acquisition to raise earnings per share by 10 to 15 cents in its first 12 months and 25 to 30 cents after that.
Liberty's customers are primarily small and midsize credit unions, while Harland serves large credit unions, Mr. Heald said. Last year Liberty generated 75% of its $135 million of revenue from checks and forms.
Additional deals in the check-printing market are "fundamental" to Harland's business strategy, Mr. Heald said. "This really expands our base of financial institution relationships."
Mr. Hollen said that Harland has capabilities that Liberty lacks, such as digital printing, and that having "the resources of a large company and the research and development that can occur" would prove to be an advantage.
In addition to printing checks, Harland's businesses include Harland Financial Solutions Inc., which sells financial software and services, and Scantron Corp., which provides testing and assessment services and supplies.
Liberty's businesses include Altafi, a strategic marketing company that Mr. Heald compared to Harland's marketing operations. He also said that Harland has nothing comparable to Liberty's Cavion Plus e-commerce software business or its MyDas Marketing education business.
Mr. Hollen said Liberty has been on "a diversification curve for some time, and so has Harland."
According to Mr. Hunt, Harland has done a good job of diversifying to adapt to the declining check market. "They have been able to go over the transitions of their business models really well."
Ms. Grealish called Harland's deal for Liberty "a classic example" of the consolidation that happens when a market such as check-printing starts to shrink. "It's a smart thing to do, because the only way to maintain unit costs when you have high fixed costs is to expand the volume."
