Zacks_Analysts' Blog : VeriFone Strengthens Distribution - Analyst Blog

VeriFone Systems, Inc. (PAY) recently announced that it has integrated Hypercom’s international distributors into the VeriFone International Partner (VIP) program. This program will provide distributors with access to support resources and a wide array of technologies to enhance their ability to deliver the latest payment solutions to their markets.

The VIP program will offer Hypercom distributors a wide range of services including in-depth product and sales training and web-based access to exclusive strategic, product and technology information.

Based in San Jose, California, VeriFone provides solutions for electronic payment systems for the financial, retail, hospitality, petroleum, transportation, government and health care vertical markets.

Last month, VeriFone acquired Hypercom Corp., one of its competitors for approximately $7.32 per share or $485 million, including assumption of net debt.

As a consequence of the merger, the company expects to expand its operations in Continental Europe by leveraging Hypercom’s strength in the European markets.

VeriFone had earlier stated that the acquisition would throw up significant operating synergies emanating from the elimination of product overlap, administrative costs and sales expenses in many markets.

Earlier, in order to get the consent for acquisition from the U.S. Department of Justice (DoJ), VeriFone agreed to divest Hypercom’s U.S. payment systems business to The Gores Group LLC.

VeriFone and Hypercom had also agreed to sell the U.S. payment systems business of Hypercom to Ingenico S.A. to addrerss the antitrust issues related to the acquisition of Hypercom. However, the deal was terminated after the DoJ sued VeriFone, preventing it from acquiring Hypercom.

The DoJ believed that the deal would aggravate the antitrust issues as the three companies (VeriFone, Hypercom and Ingenico) together serve 90% of the point-of-sale (POS) terminals market in the U.S. This could have been anti-competition and resulted in higher prices in the POS terminals.

Management anticipates that the acquisition would add $350 million to VeriFone’s top-line and approximately 20 cents-25 cents to its bottom-line in fiscal 2012.

We current have a Neutral recommendation on the stock. In the short-run, we have a Zacks #1 Rank on the stock, which translates into a short-term rating of Strong Buy.