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Nautilus Hyosung Inc., which is based in Seoul, Korea, has announced plans to buy ATM competitor Triton Systems of Delaware Inc., based in Long Beach, Miss.
Nautilus Hyosung's parent is Hyosung Corp., a $ 7 billion Korean company that maintains a diverse portfolio of heavy industries, chemicals, textile and information-technology businesses.
The acquisition is expected to close by the third quarter of 2008, pending regulatory approval.
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"Dover ultimately wrote-down an estimated $51 million off of what was previously its book value for Triton," said Sam Ditzion, chief executive of Boston-based Tremont Capital Group, a strategic-planning and merger and acquisition consultancy that advises ATM companies.
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Since the sale announcement, the industry, suspecting the buyer to be Nautilus Hyosung, has speculated about what the future holds for the Triton business and brand.
Ditzion says the deal, overall, is great for Nautilus Hyosung and the industry. But it's one more step toward market consolidation. And he expects all manufacturing to ultimately be moved overseas, since continuing to manufacture in the United States doesn't make financial sense.
"I suspect that most of the manufacturing-related functions of the business will be shifted overseas within a few years," he said. "It's a great deal — one that will end up raising the price of ATMs, since there is less market competition. That will ultimately be good for the industry, though," since manufacturers in the off-premises retail ATM space for years have been in a price war, selling ATMs for far less than they cost to produce.
The deal between Nautilus Hyosung and Triton brings back memories of NCR Corp.'s January 2006 acquisition of Tidel Engineering — a deal that ultimately led to the dissolution of the Tidel ATM brand, a once powerhouse in the off-premises ATM market.
"I don't expect this deal to be like the NCR acquisition of Tidel," Ditzion said. "I think the difference here is that by the time NCR acquired Tidel there had been so much damage, there wasn't much NCR could do to revive it. The Tidel brand name had diminished, especially because of the Credit Card Center scandal. With Triton, the brand has been hurt a little, because of the price war, but the product is still strong."
Nautilus Hyosung's swift move to close the deal was smart. Over the last 12 months, Triton has worked toward returned profitability, and Nautilus Hyosung has taken advantage, without waiting for market conditions to eat away at the Triton reputation.
Now only one of the three T's — Tranax Technologies Inc. — remains on its own, and even its future, since its split from former partner Nautilus Hyosung, has been questioned by independent sales organizations.
Tranax Technologies could not be reached for comment as of press time.
As for the future of the Triton brand, both Triton and Nautilus Hyosung say they expect to continue building it.
"Triton offers an ideal fit with Nautilus Hyosung as we expand our global footprint, not only in the U.S. but worldwide," said P.K. Ryou, chief executive and president of Nautilus Hyosung. "We look forward to adding Triton's strong brand and service chains with Nautilus Hyosung's expertise in ATMs, to provide our customers with the most comprehensive ATM offering in the marketplace."
Alicia Blanda, spokeswoman for Triton, says nothing at this point is expected to change with the Triton brand or its manufacturing facility. She said the two companies expect to continue operating autonomously.
"Nautilus Hyosung is very interested in growing the two businesses, independently, to three to four times the size that they are right now," Blanda said. "Nautilus Hyosung wants to grow the combined businesses to a $1 billion company, and they have told us they plan to invest in people, facilities and products."
Ditzion says some co-branding between the two companies will likely take place, since the Triton brand has such a strong presence and reputation among U.S. ISOs.
"Triton has a lot of strong people, in Long Beach and elsewhere, and to be successful, Nautilus Hyosung will need a longer-term plan to integrate the two plants and the brands," he said. "What Nautilus Hyosung is really buying here is the brand name and the customer list, and they will ultimately need to merge that into the Hyosung line."
What remains to be seen, however, is how successful the two brands will and can be in the U.S. financial-institution space. Both companies have focused on breaking into that market without much success.
"Nautilus Hyosung has had success on the FI side overseas, and Triton has tried for years to break into the FI market here," Ditzion said. "Now we'll have to see if they can accomplish more together."
