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Cardtronics sees promise in 7-Eleven
July 22, 2007
HOUSTON - Cardtronics Inc. has completed its acquisition of 7-Eleven Inc.'s ATM business for $135 million. As previously announced, the acquisition includes approximately 5,500 ATMs, including about 2,000 Vcom terminals, in 7-Eleven stores throughout the United States. The acquisition increases Cardtronics' ATM portfolio to approximately 31,000 ATMs, domestically and in the in the United Kingdom and Mexico.
"With the completion of this acquisition, we have further enhanced our position as the leading owner and operator of ATMs in the United States," said Jack Antonini, Cardtronics' president and chief executive. "But more importantly, we have increased the total value of our portfolio through a powerful long-term relationship with the world's leading convenience retailer. Add to that the significant new-transaction volume we have gained and the exciting potential of the Vcom advanced-functionality kiosks, and Cardtronics has clearly positioned itself as the leader in this industry with tremendous opportunities for growth."
In a regulatory filing posted prior to the close of the buy, Cardtronics said it expected the 7-Eleven portfolio to have a significant impact on its business - an impact that could have positive and negative effects.
All your eggs in one basket
Cardtronics estimates, since the acquisition, that 61 percent of its ATM network is now company-owned - a marked increase from the 52 percent company-owned ATMs Cardronics operated prior to the acquisition. And expenses and operating losses associated with the transaction are expected to impact Cardtronics' bottom line for the next 12 to 18 months.
"While we plan to continue to operate the Vcom units and restructure the Vcom Services to improve the underlying financial results of that portion of the acquired business, we may be unsuccessful in this effort," the company said.
Further, Cardtronics says that if it incurs losses of $10 million on the Vcom business, it will exit the Vcom business and use the acquired Vcom machines for basic cash dispense only.
Cardtronics estimates that in preparation of the acquisition, Vcom Services operated at a loss of $6.3 million in 2006 and at a $2.3 million loss for the three months ended March 31, 2007.
"As a result, our operating income may not improve to the extent we anticipate if we terminate the Vcom Services," the company said.
But Cardtronics sees more opportunity than risk in the acquisition, which not only opens doors for branding deals with FIs but also provides Cardtronics with a retail relationship that can help it grow internationally.
As part of the buyout, Cardtronics inked a 10-year placement deal with 7-Eleven. The deal gives Cardtronics exclusive rights to install and operate ATMs and Vcom units in existing 7-Eleven stores in the United States as well as all new or acquired stores opened by 7-Eleven domestically.
7-Eleven has more than 32,400 locations across the globe.
Each of the 3,500 ATMs included in the deal pulls, on average, 1,000 withdrawals per month. That's compares well with the 365 withdrawals being made at the average ATM in Cardtronics' pre-7-Eleven portfolio.
Cardtronics also says it sees opportunity to strengthen its Allpoint surcharge-free ATM network, which it acquired in December 2005, since 7-Eleven has a history of working with Co-Op network and Financial Service Centers Cooperative Inc., both surcharge-free networks.
In a separate filing, posted July 17, Cardtronics says it plans to raise approximately $93.5 million from a private offering to qualified buyers to fund the purchase of the 7-Eleven ATM portfolio.
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