Hypercom Corporation (HYC) has rejected the acquisition offer from rival VeriFone Systems, Inc. (PAY) for the second time. On Sep 27, 2010, VeriFone proposed to acquire all of the outstanding common shares for $5.25 per share in cash.
Hypercom stated that the proposal significantly undervalues its future prospects and is not in the best interests of its shareholders. Hypercom believes that VeriFone’s proposal is opportunistic and intended to disrupt its business as it believes it has successfully taken away market share from VeriFone in several markets.
Hypercom is confident that it has the ability to grow profitably and has strong near- and long-term value creation potential which should position it strongly to increase profits and market share. The company expects to post strong third-quarter results driven by strong demand in Europe and Asia.
Also, Hypercom believes that VeriFone’s proposal is opportunistically timed to exploit its poor second quarter 2010 results, which were affected by supply chain issues that have been resolved.
Earlier, last week, VeriFone proposed to acquire all of the outstanding shares of Hypercom Corporation at a 0.21x exchange ratio. This offer represented a premium of 52% over the closing price of $3.84 of Hypercom shares on Sep 23 and 69% over the average share price for the last thirty trading days. But Hypercom rejected the offer.
VeriFone intends to acquire Hypercom to expand its footprint in Continental Europe, where its market penetration has been lower, compared to the rest of the world.
VeriFone also stated that the acquisition will throw up significant operating synergies that will emanate from eliminating product overlap, administrative costs and sales expenses in many markets. The combination of the two businesses will lead to better product development along with significant supply efficiencies for the combined business.
VeriFone has a strong balance sheet with over $400 million of cash and investments and it might increase its offer price yet again.
HYPERCOM CORP (HYC): Free Stock Analysis Report
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