Smartcard makers merge
Smartcards are the size of credit cards, but with embedded microprocessors. They are used for an increasing number of uses: as smart credit cards, in mobile and public phones, on transit services, for storing medial information, in security passcards, and in the emerging field of biometric passports.
The merger of two key players in this market will form the dominant #1 company. French-based Axalto Holding NV (which was spun off from oil equipment maker Schlumberger in 2004) has announced it will combine with Luxemburg-based Gemplus International) in a $1.5 billion deal. The two companies are #1 and #2 in their segment, and will control between 40% and 50% of the market.
A Wall Street Journal article ("Smart-card deal would combine Axalto, Gemplus". 12/8/05) quotes one analyst as saying: "It's a defensive deal that comes just as conditions in the smart card market become increasingly less favorable, with Asian players pushing down prices." The same article quotes Axalto CEO Olivier Piou as saying "It's better to choose now with whom we join forces than to let things happen and not be able to choose our partner."
Gemplus started in 1988. The company has grown by a series of acquisitions of other smart card and technology companies, most recently in 2005 by buying Finland-based Setec, which is strong in passport and other identification card technology. Axalto traces its origins back to 1979, and had grown (as a Schlumberger division) as a result of a series of acqusitions. Both companies have a world-wide scope.
This is yet another deal in the increasingly hot security sector. While the two companies are looking over their shoulders at Chinese companies, they are also offloading manufacturing operations to China. Given the threat of Chinese competition, the dealmakers hope to slip by (increasingly lenient) EU antitrust regulators, in spite of the establishment of a very dominant company.
The deal also marks an exit route for US equity group Texas Pacific, which owns a major, but not controlling, share in Gemplus. As equity firms often do, it served as a catalyst for the eventual merger.
2:44:05 PM 
|
|
