Article

Pendum buyout negotiations underway

Company had been struggling, but now has a new investor.

May 27, 2008

Pendum Inc., the nation's largest independent provider of cash automation and armored transport solutions, may soon have a new owner, according to a written statement released by the company.

Bayside Capital, a Miami-based investment firm, has partnered with an unannounced affiliate to purchase a majority ownership in the company. Details of the agreement are still being finalized.

"Securing the investment from Bayside is a big step forward for Pendum," said Mark Hoppe, president of Pendum in the written statement. "Bayside has a strong track record of improving the performance of independent companies and providing key resources that allow them to compete with much larger organizations."

Hoppe said much of Pendum's infrastructure will remain unaffected, should the buyout go through.

"We will continue to use the Pendum brand, our customers will continue to receive quality service and Pendum's day-to-day operations will continue to be managed by the people who know our company best," he said.

Requests for Pendum to expound on the merger went unanswered, though Pamela Hoy, vice president of marketing for Pendum, said the company would provide further details at a later date. Calls to Bayside Capital were not returned.

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The news comes at a critical time for a company that had been experiencing substantial growth. Pendum was formed in January 2006 after a merger between Efmark Premium Armored and Bantek West. At that time, the company boasted a presence in 43 states where it serviced more than 100,000 ATMs.

But recently, rumors of financial hardship began to surface. In March, according to a notice in the Wall Street Journal, some of the company's assets went up for public auction after Pendum's creditors, who were owed roughly $85 million, foreclosed on those assets.

Cause and effect

Peter Davidson, an attorney for MDFS Law (which has no ties to Pendum), said public dispositions of collateral, like the one involving Pendum's assets, are similar to bankruptcy auctions, but less formal.

"It's probably easier and quicker than filing bankruptcy," Davidson said. "They're basically just handing the keys over to the secure creditors and it's a way for the secure creditors to get what they can out of it. It may lead to a bankruptcy afterwards, but there's not going to be much left in the entity that files."

Industry experts differ on why the company fell into financial hardship. One theory is that the company grew too quickly.

"The Efmark-Bantek merger probably looked very promising on paper, but it seems as though integrating the two companies and cultures was ultimately much messier than management anticipated," said Sam M. Ditzion, president and chief executive officer of the Boston-based Tremont Capital Group, a strategic-planning and merger and acquisition consulting firm that advises ATM and armored service companies.

"Skyrocketing fuel prices only added to the pain, which has inflicted everyone in the armored and ATM servicing industries," he added.

Ditzion emphasized that neither he nor his company have any connection with Pendum.

Other industry experts have a different take. Jerry Gregory, the chief development officer at Richardson, Texas-based Cash Carriers, a Pendum competitor, theorizes that the reason Pendum faced such serious cash-flow troubles is the company's pricing schedule.

Gregory says Pendum has been undercutting the market.

"As Pendum's competitor, Cash Carriers U.S.A. has been forced to compete with their pricing for many years," Gregory said. "I was not surprised to hear that they had been attempting to operate with an accumulated $85 million debt. In my opinion, Pendum's pricing structure for armored services has been a rapid drain on cash flow for quite some time now."

Gregory reinforced Ditzion's assertion that ever-increasing fuel and insurance costs are having a devastating effect on all cash carriers and called for an increase in ATM surcharge rates to help other cash management companies stave off overhead costs.

"Armored providers cannot continue to provide minimal cost to ISO ATM owners as has been customary in past years," Gregory said. "ISOs are not in the position to pay for these increased armored services at the present surcharge rates. The only possible result is survival through increased surcharge fees or continued prayers for $1.50 a gallon fuel and realistic insurance companies."

A lifeline?

The news of Bayside Capital's investment breathes new life, not only into Pendum, but also the entire ATM industry, according to Ditzion.

"Pendum is still one of the nation's largest service providers for ATMs with a vast base of clients, so this deal with Bayside Capital and Pendum's related survival is a very positive development for the ATM industry and all of its players," Ditzion said. "This lifeline will give Pendum a chance to go back to basics and rebuild its business using the same techniques that initially made Efmark and Bantek so successful in the first place."

Gregory also noted Pendum's significance to the industry.

"I just can't imagine the result of Pendum shutting their doors," Gregory said. "The prospect of such an incident could forever damage our industry."