VeriFone Gains Wireless-Terminal Strength with Lipman Acquisition

VeriFone Holdings Inc.'s proposed $793 million acquisition of rival Lipman Electronics Engineering Ltd. will give the U.S.'s leading payment terminal maker access to more countries and the fast-growing wireless-terminal segment, a processing analyst tells Digital Transactions News. “The advantage for VeriFone is to get into more countries offshore,” says Jamie Savant, an associate with Omaha, Neb.-based merchant-acquiring consultancy Strategic Management Partners. Founded in 1974, Rosh Haayin, Israel-based Lipman markets terminals in about 20 countries and, according to Savant, is known for its wireless technology. “That's going to assist VeriFone in getting into other countries where wireless is a key to online retail transactions,” he says. VeriFone chief executive Douglas Bergeron confirmed that view at an analysts' conference call this morning. He noted that Lipman is strong in the big emerging markets of China, India, Turkey, and Brazil, and certain Western European countries, especially the United Kingdom, Italy, and Spain. San Jose, Calif.-based VeriFone, meanwhile, is strongest in its home country and has a considerable presence in Mexico, the Caribbean, Eastern Europe, and Southeast Asia. “We are very complementary in our market penetrations,” he said. Bergeron also noted that while VeriFone has been devoting considerable resources to developing its own wireless payment products, the acquisition of Lipman would give VeriFone the leading wireless terminal supplier in the U.S. and elsewhere. “Everywhere they compete, they have the leading share of the wireless installed base,” he said. Lipman also may enhance VeriFone's relationships with independent sales organizations. Savant says Lipman pursued the ISO distribution channel well before VeriFone, though VeriFone recently has said it is beefing up its ISO efforts. Lipman had revenues of $235.4 million in 2005, up 30% from 2004, and profits of $20 million. VeriFone had net revenues of $485.4 million in fiscal 2005 ended Oct. 31, up 24%, with net income of $33.2 million. Bergeron, who for years has said the terminal industry is ripe for consolidation, described Lipman as a well-run company with no debt. “This is not a turnaround story,” he said. The merger is sure to put pressure on VeriFone's archrival, Phoenix-based Hypercom Corp., as well as Ingenico, the big France-based terminal maker. Hypercom, with net revenues of $245.2 million last year, and Ingenico both operate in the U.S. and many other countries, but Bergeron claims the VeriFone-Lipman combo will make VeriFone No. 1 or No. 2 in most of its major markets. Savant says VeriFone's offer “seems reasonable,” and Wall Street apparently agrees. In mid-afternoon New York Stock Exchange trading, VeriFone shares were up 8% over Friday's close, and Lipman's were up 2% on the NASDAQ exchange. The buyout plan is subject to shareholder approval by both firms. It gives Lipman stockholders options of receiving stock and cash adjusted for a special dividend likely to exceed $23 million. Shareholders also can elect to receive straight stock or all cash, each adjusted for the special dividend. VeriFone expects to close the deal by Oct. 31.