VeriFone has launched a £337 million hostile bid for rival card terminal outfit Hypercom after seeing an initial friendly approach rebuffed.
VeriFone says its all-cash bid represents a 52% premium over Hypercom's closing share price on Thursday last week, prior to a share-for-share proposal presented to the Hypercom board on Friday.
Hypercom has vigorously rejected the bid, which it says singificantly undervalues the company. In a statements, the company says: "Hypercom believes that VeriFone's proposal is opportunistic and intended to disrupt its business, which has successfully taken market share from VeriFone in several markets."
Shares in Hypercom soared in after-hours trading, rising 45% to $6.12 as investors speculated that VeriFone's approach might draw out other bidders, including France's Ingenico which abandoned a $332 million Hypercom takeover attempt two years ago.
In a letter to the Hypercom board, VeriFone CEO Douglas Bergeron writes: "Consummation of the proposal would insulate your shareholders from the risk that Hypercom faces should it continue to experience disappointing financial and operating results in these challenging markets."
He goes on to say that VeriFone would be prepared to take "extraordinary steps" to win regulatory approval for the bid, including the sale of Hypercom's US terminal business.
If successful, the acquisition would give VeriFone an expanded footprint in Europe, where Hypercom currently commands a 23% market share.
However, Hypercom is preparing to mount a strong defence, noting that it expects to significantly exceed Wall Street securities analysts' consensus estimate of $112 million in net revenues for the third quarter, following strong sales in Asia and Europe.
"We believe that VeriFone's proposal is opportunistically timed to exploit our second quarter 2010 results which were affected by supply chain issues that have been resolved," says Philippe Tartavull, Hypercom's Chief Executive Officer and President. "Hypercom is currently experiencing the strongest growth in global order demand in recent years and we are focused on converting this demand into revenue in the second half of 2010."
The company says it is adopting a stockholder rights plan to fight off VeriFone and has hired UBS and DLA Piper as financial and legal advisors.