DoJ Indicates Settlement Near in Antitrust Challenge to VeriFone-Hypercom Merger

The U.S. Department of Justice indicated Monday that a settlement of its antitrust challenge to the planned acquisition by VeriFone Systems Inc., the leading U.S. point-of-sale terminal maker, of rival Hypercom Corp. could be reached by Aug. 30. A DoJ court filing, however, does not give details about any pending settlement, which would make possible the sale of Hypercom’s U.S. assets with the DoJ’s blessing.

A DoJ motion filed in U.S. District Court in Washington, D.C., asks the court to continue the current stay on its challenge until Sept. 1. The court earlier stayed the proceedings until Aug. 1, at which time it asked for an update about negotiations from the involved parties.

In its May lawsuit, the DoJ challenged VeriFone’s plan to sell most of Hypercom’s U.S. assets to the North American subsidiary of France-based Ingenico S.A. In proposing to buy Hypercom, which VeriFone wants mostly for its sizable European business, VeriFone said it was willing to sell Hypercom’s U.S. assets to allay antitrust concerns. The deal needs sign-off from U.S. and European competition authorities. The DoJ, however, said a sale to Ingenico wouldn’t pass muster since VeriFone, Ingenico, and Hypercom are by far the leading POS terminal sellers in the U.S. The DoJ indicated that a different buyer for the Hypercom assets might be acceptable.

“Since the previous stay was issued, the United States, VeriFone, and Hypercom have continued to explore whether an alternative buyer of Hypercom’s U.S. business would address the United States’ competitive concerns with VeriFone’s proposed acquisition of Hypercom,” says the motion signed by Ryan S. Struve, an attorney in the DoJ’s Antitrust Division. “The parties have engaged in extensive settlement discussions, and the parties believe that a settlement can be reached whereby an alternative buyer acceptable to the United States will take control of Hypercom’s U.S. business.” The filing says the parties believe a settlement “can be accomplished by Aug. 30, 2011,” and thus were asking for a stay to complete negotiations.

Spokespersons for San Jose, Calif.-based VeriFone and Scottsdale, Ariz.-based Hypercom did not respond to Digital Transactions News requests for comment late Monday afternoon. In the DoJ filing, however, Struve indicated that all involved parties consented to the agency’s motion.

The DoJ gave no indication as to who a possible buyer might be. Santa Clara, Calif.-based ViVOtech Inc., a specialty maker of contactless payment terminals and software, earlier indicated interest in the Hypercom assets. Another subject of speculation is Melville, N.Y.-based PAX Technology Inc., a subsidiary of the Chinese terminal maker PAX and a newcomer to the U.S. market. A senior ViVOtech executive did not respond to a Digital Transactions News e-mail requesting comment, and a PAX Technology executive declined comment.

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One company reportedly interested enough in the Hypercom assets to have begun negotiations is Gores Technology Group, a unit of private-equity firm The Gores Group LLC, according to a report last week in mergermarket, a newsletter affiliated with the Financial Times newspaper. VeriFone chief executive Douglas Bergeron was group president of Gores Technology back in 2001 when Gores bought VeriFone from Hewlett-Packard Co. Bergeron and affiliates of GTCR Golder Rauner LLC, another private-equity firm, led a recapitalization of VeriFone in 2002. The company went public in 2005. A Gores spokesperson could not be reached for comment.

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To ensure regulatory approval in Spain for the Hypercom-VeriFone transaction, Hypercom in June agreed to divest its Spanish business to Klein Partners, a private-equity firm, according to a VeriFone spokesperson. Terms were not disclosed. The divestiture, which VeriFone called “not material,” is subject to the closing of the overall transaction.

VeriFone is proposing to buy Hypercom in a stock deal valued at about $485 million. Ingenico had proposed to buy the U.S. assets for $54 million.