VeriFone Holdings Inc. on April 10 announced it would buy Lipman Electronic Engineering Ltd. The deal was valued at $793 million based on VeriFone's closing stock price on April 7. The two are ranked among the top four point-of-sale terminal manufacturers and marketers worldwide.
The acquisition would create a payment-terminal outfit with top technology and worldwide distribution channels, according to analysts and company executives.
In announcing the deal, San Jose, Calif.-based VeriFone cited Lipman's research-and-development strengths and manufacturing capabilities, as well as its leadership in the wireless-terminal sector.
William Atkinson, VeriFone executive vice president, also says Lipman has strong ties to independent sales organizations, and it boasts a large footprint in Turkey, India, China and Brazil.
Wireless is the technology of the future, says Atkinson. "In 2005, 25% of VeriFone's international (sales) were wireless. In 2004, 5% were wireless," he says.
VeriFone reported net revenues of $485.4 million in its fiscal 2005 year ending last Oct. 31. Rosh Haayin, Israel-based Lipman generated $235.4 million in revenue in 2005. Atkinson says VeriFone would like to complete the deal by the end of fiscal 2006. The deal needs approval by both companies' shareholders and by U.S. and Israeli regulators, VeriFone reports.
Robert Dodd, an analyst who follows Lipman and Hypercom Corp. for Morgan Keegan, calls the takeover "a pretty good deal" for VeriFone at less than $800 million.
Dodd says VeriFone would overtake France-based Ingenico to become the top-selling payment terminal marketer in the world if the deal goes through.
VeriFone does not release unit shipment data. Lipman sold 851,627 terminals in 2004, according to Cards&Payments sister publication Card Technology.
In the complex buyout, Lipman shareholders would have three options for tendering their stock: all cash, all stock or a stock and cash deal. Whatever their selection, current Lipman shareholders would participate in a special dividend whose value has not been determined but "will likely exceed $23 million," according to the companies.
In the cash option, Lipman shareholders could opt to receive $29.07 for each share they own. In the stock deal, shareholders would receive 0.9844 shares of VeriFone stock for every Lipman share they own.
In the third option, Lipman shareholders could choose to receive 0.5 shares of VeriFone stock and $14.304 in cash.
George Sutton, an analyst who follows Hypercom for Craig-Hallum Capital Group, says Hypercom could benefit from the deal in several ways. It may become the target of a takeover from NCR Corp., IBM Corp. or another major cash-register marketer. Investors also could bid up all payment-terminal stocks, lifting Hypercom's stock price, he says.
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