Jul. 13, 2011
NCR Corp. bolstered its position at the point of sale this week by announcing a deal to buy Radiant Systems Inc. for $1.2 billion in cash. Alpharetta, Ga.-based Radiant Systems is a specialist in POS software and hardware for various merchant segments, especially the hospitality industry and specialty retailers.
Besides being the leading ATM maker, NCR already has a major point-of-sale presence in both unattended and attended grocery lanes and other merchant segments. It also makes the Blockbuster Express DVD-rental kiosks that compete with Coinstar Inc.’s Redbox kiosks. “Getting into food and hospitality is a big play,” says George Peabody, director of the emerging technologies advisory service at Mercator Advisory Group Inc. “There’s so much ferment going on in the retail payment space … [NCR] will be able to get some synergies that are pretty interesting.”
Radiant and rival Micros Systems Inc. are not payment specialists in the way that terminal and payment software makers VeriFone Systems Inc., Hypercom Corp., and Ingenico are. In serving their merchant niches, however, both Radiant Systems and Micros provide payment-processing technology to such a degree that, in their annual reports, they list compliance with the Payment Card Industry data-security standard (PCI) as important aspects of their business. Radiant’s product list also includes loyalty and stored-value systems, “everything adjacent to the payment itself,” says Peabody.
Radiant Systems claims to have 100,000 installations in worldwide, and it also has a host of so-called channel partners, or resellers. Major food-service customers include Chick-fil-a, Dunkin’ Donuts, Chipotle, California Pizza Kitchen, and Burger King. The company’s customer base also includes four international oil companies, including Shell and ExxonMobil, and six of the top 10 theater chains. NCR said Radiant would give it a so-called “third vertical” after its financial and retail business lines. Radiant’s chief operating officer, Andy Heyman, will head the new vertical.
“The transaction accelerates NCR’s strategy of expanding into core industry adjacencies, increasing revenue growth rates and expanding margins by enhancing its mix of software and services,” NCR said in a news release late Monday. “NCR plans to leverage Radiant Systems’ leadership position in quick-service and table-service restaurants, specialty and convenience retailers and entertainment venues by combining Radiant Systems’ solution and services portfolio with NCR’s existing portfolio, brand, and global reach.”
Radiant Systems posted total revenues of $87.1 million in the first quarter, up 10% from a year earlier. Hospitality customers in the Americas accounted for 60% of revenues followed by retail and entertainment merchants in the Americas at 26%. NCR had revenues of $1.1 billion in the first quarter, up 6%. “NCR management expects the combination with Radiant will help shift its revenue mix towards higher margin software and services given Radiant’s software delivery model and professional services, which make up 50% of Radiant’s revenue,” says a report on the deal by investment bank Goldman, Sachs & Co.
Duluth, Ga.-based NCR is offering $28 per Radiant share, a 31% premium over Radiant’s share price just before the announcement. NCR expects the deal to close by Sept. 30.
In a conference call with analysts announcing the deal, NCR chief executive Bill Nuti also said NCR was "actively exploring strategic options" for its DVD-rental business, which he said isn't as complementary as Radiant to NCR's business lines.
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