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Genpass' sale was no big surprise

The announcement of Genpass Inc.'s sale May 10 didn't come as a big surprise. But U.S. Bank flew beneath the radar of some analysts as the acquirer.

May 17, 2005

The sale of Fort Washingon, Pa.-based Genpass Inc. (also dba Genpass Technologies LLC, which is based Irving, Texas) came as no big surprise to the ATM industry.

Genpass, founded in July 2000, was backed by private-equity investment firm GTCR Golder Rauner, a Chicago-based company. According to Tony Hayes, managing director of financial services practice for Boston-based Dove Consulting Inc., after nearly five years of financial backing from GTCR, industry experts expected the sale announcement.

But what may have come as a bit of a surprise to some industry insiders was U.S. Bank's purchase of Genpass - the second largest third-party ATM processor in the United States.

What's Important Surcharge-free networks are on the rise. The acquisition helps U.S. Bank expand its business beyond ATM processing. The deal makes U.S. Bank the second largest ATM processor in the United States.

 A subsidiary of Minneapolis-based U.S. Bancorp, U.S. Bank flew beneath analysts' radar - even if the sale makes sense for the bank's growth.

"There are a lot of companies that may have been interested in Genpass because of its span - ATM processing, ATM servicing and debit and prepaid processing," Hayes said. "It cuts across a wide industry, and it had assets that would have been attractive to many organizations."

A good move

For U.S. Bank, he added, the acquisition makes sense for two reasons: the assumed cost to buy Genpass, which U.S. Bank would not disclose, and growth.

In fact, the purchase made U.S. Bank the second largest third-party ATM processor in the country - second only to Denver, Colo.-based First Data Corp., which operates the STAR Network, created in 1992.

"Based around economy of scale, by buying Genpass, U.S. Bank dramatically increases its processing business," Hayes said. And there isn't a lot of customer overlap between Genpass and U.S. Bank either, Hayes added. "Genpass has around 300 ATMs, which are mainly in casinos, and that will be different for U.S. Bank."

Jan Estep, executive vice president of U.S. Bank Transaction Services and manager of U.S. Bancorp's processing business - Elan Processing Services - supported Hayes' findings. "As U.S. Bank, we will continue to grow our services, multiple services," Estep said. "It's just not part of ATMs, but our goal is to provide (more) services in processing."

Estep said U.S. Bank had been in discussions with Genpass for months. The bank was looking for a quick way to grow its business. That's because, prior to the acquisition, "the majority of (U.S. Bank's) growth had been organic," Estep said. "We look at this acquisition to add breadth and depth to our services."

Processing nothing new to Elan

Elan handles processing for more than 7,700 ATMs. With the acquisition of Genpass, that number jumps to about 31,000, which sharpens Elan's competitive edge.

Although U.S. Bank falls into a defined second-place slot to First Data, whose Star Network includes access to more than 1.6 million ATMs and retail locations, U.S. Bank's footprint is substantial.

The acquisition increases the financial institutions Elan works with by 500, to a total of 3,500. And the acquisition expands Elan's surcharge-free ATM access network, Fastbank Free, which is a subset of Elan's Fastbank network of 10,000 ATMs.

Elan is now the second-largest surcharge-free network in the United States, second only to Allpoint, founded by Bethesda, Md.-based ATM National Inc. in May 2000. 

In fact, growth of surcharge-free access is what made Genpass most attractive to U.S. Bank, Hayes said, since surcharge-free access is an expected area of growth.

Through the acquisition, Genpass' three EFT network brands - MoneyPass, MoneyMaker and Money Belt - will now be operated by Elan. MoneyPass, which is a subset of MoneyMaker and Money Belt, is Genpass' surcharge-free network, established in November 2003.

MoneyMaker and Money Belt are traditional ATM networks, and both predate the formation of Genpass.

The deal

Estep said U.S. Bank has no immediate plans to change Genpass as the business operating name, and Genpass' 350 to 360 employees will become employees of U.S. Bank.

Operations of the acquired networks will remain at the Texas facility, Estep added.

As of the posting of this story, no one from Genpass could be reached for comment.