VeriFone completes Point acquisition, NFC payments all around

VeriFone completes Point acquisition solidifying the firm’s position in Northern Europe and also refinances some debt ready for NFC adoption by retailers

VeriFone appears to be growing larger and larger as today’s news announces that the firm has just completed its merger of Northern European payment gateway company Point. VeriFone has taken some stick lately when the expected NFC bonanza didn’t come in the 3rd quarter of last year. That fact is that NFC adoption by retailers is largely out of VeriFone’s hands as the wallet wars obstruct earlier deployment and therefore the need for NFC POS terminals. However, that isn’t preventing VeriFone from readying itself for the expected new NFC payments landscape as the firm continues to buy up competitors in strategic markets.

VeriFone intends to add the ubiquitous nature to NFC payments, mobile wallets and offers straight from the NFC POS terminal

While everyone is speaking about ubiquity and when that may come to pass, firms like VeriFone are building the underpinnings of this brave new industry that will see consumers use Near Field Communication and EMV to make payments. At a really basic level, ubiquity will come in the form of NFC POS terminals that can accept payments from PayPal, Google Wallet, Isis, Visa and so on. Interestingly, VeriFone also adds Groupon to that list of supported payment firms, although this could be strictly from a loyalty and couponing perspective. It does let us know that Groupon is probably going the NFC route sooner rather than later though.

“This acquisition supports our vision of offering retailers everywhere a managed service to easily accept all existing payment types, including the evolving alternative and mobile payment methods being offered by traditional card brands and new entrants such as Google, PayPal, Groupon and Isis,” said VeriFone CEO, Douglas G. Bergeron. “The new entrants can take advantage of easy and accelerated access to VeriFone’s worldwide installation of more than 20 million merchant lanes.”

The Point acquisition is a strategic one for many reasons. Point, which is based in Stockholm, has operations in 11 European countries and serves a captive network encompassing almost 475,000 merchant contracts. That means VeriFone gains a strong hold in most of Europe’s most wealthy countries with its particular flavor of NFC POS terminals. Through this network, Point offers retailers a full range of multi-channel services and solutions, including point-of-sale technology and support, gateway services, card encryption services, and e-commerce processing. The addition of E-commerce processing gives us clues at what direction VeriFone intends to take. Remember Intel is designing PCs and potentially Macs that can handle NFC transactions through websites, and Point’s E-commerce ability no doubt opens a new market to VeriFone that it is itching to get into.

VeriFone also takes the acquisition opportunity to restructure some debt for low interest rates and a nice new line of credit

It normally isn’t getting the money together for an acquisition that is the hard part. VeriFone now has to incorporate Point into its infrastructure, and potentially add some of Point’s systems to its own. Having a solid line of credit will essentially help the firm blend the two entities and retain or attract new talent to the team. However, to finance the purchase of Point, VeriFone took a gamble and took out a $1.5 billion loan from J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, Barclays Capital and RBC Capital Markets.

The loans are structured as a 5-year Term A loan for $918.5 million, a 5-year revolving line of credit for $350.0 million, and 7-year Term B Loans for $231.5 million. VeriFone has shown in the past it pays back its debts and so its previous success combined with its bigger footprint, and new NFC market opportunities no doubt helped it get loans in a time when it is harder than ever for businesses to get financing, especially at decent rates.

NFC payments is set for massive growth this next year and 2012 is just the first in many years that will see the technology expand exponentially. It looks as if VeriFone with its larger footprint and new found dominance in the European markets will be well placed to capitalize on opportunities for the next few years as NFC payment technologies become widespread. Whereas the NFC bubble is yet to burst and VeriFone’s profits are yet to go in to the stratosphere, lenders seem to want to bank on VeriFone’s future success even if investors get twitchy when the firm has a quarter end earnings call.