The DoJ Anoints Gores As the Designated Buyer of Hypercom’s U.S. Assets

The U.S. Department of Justice announced Thursday that it had reached a settlement with point-of-sale terminal makers VeriFone Holdings Inc. and Hypercom Corp. that calls for the sale of Hypercom’s U.S. assets to a unit of private-equity firm Gores Group LLC. The settlement removed an obstacle that held up VeriFone’s planned acquisition of Hypercom. The divesture will create a new player and preserve competition in the concentrated U.S. POS terminal market, the DoJ said.

Thursday’s announcement cames just days after the DoJ indicated that a settlement was near. The department sued in May to stop VeriFone’s planned $485 million stock acquisition of Scottsdale, Ariz.-based Hypercom that the companies announced last November. VeriFone said it wanted Hypercom mostly for its strong European business, and the companies had planned to divest Hypercom’s U.S. assets to the North American subsidiary of France’s Ingenico S.A. to allay possible antitrust concerns. But the DoJ still objected, saying such a sale would leave the U.S. with only two major suppliers, giving VeriFone and Ingenico too much power over pricing and limiting customer choice. Citing an industry report, the DoJ said in a court document that San Jose, Calif.-based VeriFone had 48% of the U.S. market in 2009 followed by Ingenico with 26% and Hypercom 18%.

“The Department of Justice’s proposed remedy ensures that competition will remain in point-of-sale terminal markets,” Christine Varney, assistant attorney general in charge of the DoJ’s Antitrust Division, said in a statement. “The proposed sale of the Hypercom assets to Gores will create an independent and significant competitor in the United States, both right now and into the future.”

Documents filed with the settlement agreement did not say how many companies besides Los Angeles-based Gores may have expressed interest in the Hypercom assets. Specialty contactless terminal maker ViVOtech Inc. went public with its interest, and recently Gores had been rumored to be a prospective buyer.

Gores is a notable buyer because it’s a financial company that will soon be in the business of running a POS terminal maker. And it’s also the firm that used to employ VeriFone chief executive Douglas G. Bergeron. Bergeron was group president of Gores Technology when Gores bought VeriFone from Hewlett-Packard Co. in 2001.

In a court filing, the DoJ said Gores “is well suited to acquire the divestiture assets. Gores specializes in acquiring technology organizations and managing them for growth and profitability.” The document cited Gores’s experience in the POS terminal industry, noting its acquisition of VeriFone from H-P, its recapitalization of the terminal maker in 2002 with another company, and VeriFone’s emergence as an independent, profitable firm.

Later Thursday, VeriFone issued a press release saying it had completed the Hypercom acquistion. Hypercom's remaining businesses will add about $350 million in annual revenues to VeriFone, which had been on track to generate revenues of about $1.15 billion in its 2011 fiscal year.

Under terms of the settlement aggreement filed in U.S. District Court in Washington, D.C.,  the sale to Gores includes physical assets, personnel, intellectual-property rights, transitional support, “and all other assets necessary for Gores to become a viable competitor in this industry,” the DoJ said. If the assets were not sold to Gores within 20 days following entry of the final judgment, a trustee would be empowered to sell them to another buyer acceptable to the DoJ.

The documents did not state how much Gores paid for the Hypercom assets. Ingenico had offered $54 million.