Digital Transactions Authoritative, insightful and timely information for payments professionals
The agreement by Cardtronics Inc., the nation's largest ATM operator, to buy 7-Eleven Inc.'s entire U.S. fleet of 5,500 ATMs and Vcom multi-function kiosks hands the convenience-store chain a hefty return on its ATM investment while expandng Houston-based Cardtronics' network of machines by about 20%. The approximately $135 million cash deal, announced on Tuesday and expected to close by the end of June, will bring a nice profit to 7-Eleven. The company paid $44 million to American Express Co. just three years ago for 5,483 AmEx machines in 7-Eleven corporate-owned, franchised, or licensed stores (Digital Transactions News, Aug. 18, 2004). The sale price thus represents a 45% annualized return on 7-Eleven's investment. AmEx bought the 7-Eleven network in 2000 from EDS Corp. 7-Eleven wouldn't say how the deal originated, but in an e-mail, Joel Antonini, Cardtronics' vice president of marketing, says, “we were approached by an investment banker concerning the opportunity.” A 7-Eleven spokesperson tells Digital Transactions News the company will use the money to fund store remodelings, new store openings, and technology upgrades. “The sale allows us to reinvest resources back into our system,” she says. 7-Eleven will continue to receive some fee income from the machines, though neither company would discuss specifics. The deal, meanwhile, gives a huge boost to Cardtronics' U.S. operations at a time when its foreign business is growing faster. Under the 10-year agreement, Cardtronics gets the rights to own and operate the fleet and to place machines in any new 7-Eleven stores. “Acquiring the 7-Eleven ATM portfolio is a natural extension of our strategy to partner with major retailers in high-traffic locations,” Jack Antonini, Cardtronics' president and chief executive officer and Joel Antonini's father, said in a statement. “7-Eleven is a world-class organization. This acquisition will provide a significant boost to Cardtronics' transaction volume while simultaneously moving Cardtronics into a leadership position in offering advanced, non-traditional financial services via the advanced-functionality kiosks.” About 2,000 of the machines are Vcoms that provide check cashing, bill payments, and money transfers in addition to cash dispensing and balance inquiries. Next up for the Vcoms is image deposit acceptance. “Development of the image deposit capability is nearing completion, with testing followed by the actual rollout to begin soon,” says Joel Antonini. 7-Eleven in 2006 struck a surcharge-free agreement with Citigroup Inc. under which the machines were branded with Citi's logo. That arrangement will continue. Money orders now sold at the Vcoms will revert to the sales counter after the deal closes. The companies refuse to explain that change. Cardtronics last month reported first-quarter revenues of $74.5 million, up 7.8% from $69.1 million a year earlier, though net its loss increased to $3.4 million from $3.1 million. The revenue increase came mostly from more business in the United Kingdom and Mexico, while results in the U.S. were lower because of higher selling and administrative costs and business-development efforts. The company had an average of 25,228 transacting ATMs in the first quarter, down 3.7% from 26,188 in 2006's first quarter, with most of the decline coming from the U.S. Dubbing the first-quarter results as “generally where we expected them to be,” CEO Jack Antonini said 2007 would be a year of “significant investment” for Cardtronics. U.S. ATM owners are struggling from consumers' growing unwillingness to pay fees for cash withdrawals and the rising popularity of getting cash back fee-free with point-of-sale debit card purchases. In addition, the sheer growth of ATM fleets by banks and non-bank operators such as Cardtronics has put downward pressure on per-machine transaction volumes.
