Ex-VeriFone CEO Would Mull Making Buyout Bid at Right Priceby
Doug Bergeron says he can raise funds ‘at a week’s notice’
He’d be interested in making a bid if shares fall to $11-12
Doug Bergeron has an alert set on his phone to let him know when the shares of VeriFone Systems Inc. drop. If the price hits $11 or $12, the former chief executive officer of the company says he’s ready to orchestrate a buyout.
VeriFone, one of the world’s largest makers of payment-terminal hardware, has slid 32 percent this year to $19.13 as a lengthy certification processes for new chip-card terminals delayed sales in the U.S. and price competition in emerging markets intensified. Last month, the stock fell the most in more than three years after the company cut its outlook for full-year earnings by as much as 17 percent. To boost sales, the company has been working to bring out a new generation of devices and a services platform.
If VeriFone slips to $11 or $12 a share, “I’d envision lots of people being interested, including myself,” said Bergeron, who was the CEO of VeriFone for 12 years before being ousted in 2013 following disappointing results. “I could raise the capital to buy the company at a week’s notice,” he said in an interview.
While VeriFone has reaped the benefits of a U.S. shift to terminals that accept credit and debit cards with embedded digital chips, many major merchants have by now already made the switch, raising investor concern about a sales slowdown. In the U.S., the San Jose, California-based company risks losing market share to newer rivals vying for smaller merchants, like Square Inc. and First Data Corp.’s Clover, while macro-economic challenges loom in Brazil, Turkey and Russia.
A spokesman for VeriFone said the company doesn’t comment on rumors and speculation. The company has said it’s planning to cut jobs, which could yield $30 million in cost savings next year, and reviewing underperforming businesses.
Eugene Robin, principal at Cove Street Capital, which began buying the stock in June, said he’d oppose a takeover by Bergeron. The shares are trading about where they were when the former CEO left in 2013.
“Basically, I think it’s the height of irony that the person who created the mess is talking about doing a buyout,” Robin said in an interview. “If he came in and offered a 30 percent premium in a buyout, we’d sue him gladly. That cannot and will not happen. The guy had a horrendous track record of destroying value.”
VeriFone has been a historically volatile stock, falling to an all-time low of $4.11 in late 2008 and reaching an all-time high of $54.95 in March of 2011. Bergeron, once VeriFone’s largest individual shareholder, said he sold his shares last year.
Bergeron, 55, said the competitive and economic issues in emerging markets “will sort themselves over time,” and VeriFone would thrive with a better management team.
Bergeron helped an investor group acquire VeriFone from Hewlett-Packard Co. in 2001, taking it public in 2005. Since leaving the company, he’s partnered with private-equity firm GTCR to form Opus Global Holdings and invest as much as $500 million to buy financial-industry assets and companies. Opus has made two acquisitions to date, Bergeron said. Now he sees value in looking at VeriFone again.
“Ultimately, just like 2001, we saw a great brand in a mismanaged company,” Bergeron said.
Mobile Wallet Growth
Despite recent struggles, VeriFone is expected to resume “mid-to-high single-digit” growth within the next few quarters, Gil Luria, an analyst at Wedbush Securities Inc., said in an e-mail. Over the next few years, VeriFone could see growth in terminal sales as more consumers use mobile wallets like Apple Pay, he said.
The company also is looking beyond hardware, which accounted for 66 percent of fiscal 2015 revenue. Some analysts believe VeriFone should stay the course, having just completed a restructuring of the business under CEO Paul Galant.
“While financial considerations for a leveraged buyout may be attractive, we see little operational reason to do so,” Credit Suisse analysts Paul Condra and Mrinalini Bhutoria said in a research note last month. “Management is well along in its restructuring initiatives” and going private won’t help, they wrote.
In the longer term, VeriFone may be better off operating as a private company, especially if demand for payment-card readers in developed markets wanes and management must make tough strategic decisions, they said.