News

Cab company a long shot in takeover bid for Australia's Cashcard

January 11, 2004

SYDNEY - Analysts give Cabcharge only a slim chance of winning a takeover battle for independent ATM operator Cashcard, according to a report in the Sydney Morning Herald.

(See related stories First Data to expand ATM activities in Australia with purchase of Cashcard, Price for Australia's Cashcard said to be $148M and Australia's Cashcard, in deal with First Data, may have another suitor)

The possibility of regulatory intervention blocking rival bidder First Data Corporation is regarded as the taxi cab payments group's main hope.

Cabcharge said last week it was a potential bidder for Cashcard. However, analysts believe it would have to raise at least $200 million to fund the purchase, a steep order for a company capitalized at $380 million.

The $30 billion Colorado-based First Data in late December signed an agreement to take over Cashcard for an undisclosed sum.

"We suspect that Cabcharge is really only at the preliminary stage of discussions and could be a potential second option if the First Data offer falls over, perhaps due to regulatory reasons," said ABN Amro's Chris Sleep in a note to clients.

"We would also find it difficult to imagine that Cabcharge would pay more than First Data, with the latter group likely to be able to extract much higher synergies."

According to the Morning Herald, any party is free to make a rival offer because Cashcard is a public, although unlisted, company.

The sale is being watched by a who's who of Australia's regional financial institutions, and private equity investor Gresham Private Equity, which owns 29 percent of Cashcard.

Investors include Suncorp Metway, St George, Bank of Queensland, IMB, Adelaide Bank, AMP Bank, Heritage Building Society and Newcastle Permanent Building Society, among others.

First Data's bid is still to get approval from the Australian Competition and Consumer Commission (some talks have already been held), and needs court and shareholder approval because the offer involves a scheme of arrangement.

The merged entity would dominate the independently owned ATM/electronic funds transfer market.

"An acquisition of this nature would appear to be a step away from the taxi industry for Cabcharge, however it is still within the payment systems arena, which we believe to be the company's core competency," Goldman Sachs JBWere said in a note.