2nd UPDATE: Justice Sues To Stop VeriFone-Hypercom Deal
May 12 2011 - 3:50PM
Dow Jones News
The U.S. Justice Department filed an antitrust lawsuit Thursday
to block VeriFone Systems Inc.'s (PAY) proposed $485 million
acquisition of Hypercom Corp. (HYC), arguing that the deal would
harm competition in the market for payment terminals used by
retailers to accept credit and debit cards.
The news sent the companies' shares down. VeriFone closed down
6.7% at $46.64 while Hypercom shares closed down 12% at $9.59.
The Justice Department said the two companies control more than
60% of the U.S. market for point-of-sale terminals used by the
largest retailers.
The companies had sought to address potential antitrust concerns
by agreeing to sell Hypercom's U.S. business to Ingenico SA
(ING.FR), the largest worldwide provider of such terminals. The
Justice Department, however, said the proposed fix to the merger
was inadequate, noting that Ingenico was the only other significant
competitor to VeriFone and Hypercom in the U.S. market.
"The combination of VeriFone and Hypercom would likely lead to
retailers paying higher prices for POS terminals," U.S. Assistant
Attorney General Christine Varney, head of the department's
antitrust division, said in a statement. "The proposed divestiture
does not resolve the significant competitive concerns posed by the
merger, and in some ways exacerbates them."
The lawsuit, filed in a Washington federal court, seeks to block
the proposed merger as well as the related transaction with
Ingenico.
If the transactions are allowed to proceed, VeriFone and
Ingenico "would become so intertwined and codependent in the United
States that they would operate more as affiliates than as
competitors," the department said in court papers. It said the
companies would become "a cooperative duopoly in full control of
the sale of POS devices in the United States."
Representatives for VeriFone and Hypercom didn't immediately
respond to requests for comment.
An Ingenico spokesman declined to comment.
VeriFone and Hypercom disclosed the proposed deal last
November.
-By Brent Kendall, Dow Jones Newswires; 202-862-9222;
brent.kendall@dowjones.com
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