Check printing deal
US-based holding company M & F Worldwide Corp. announced it would buy John H, Harland Company, a US-based check printer, for $1.7 billion.
The check printing industry is a declining one, as electronic payments, credit and debit cards are decreasing check us in the US. In fact, the Federal Reserve reports that checks now are involved in 40% of all non-cash transactions in the US, down from 60% in 2002. Moreover, steady declines are expected over the upcoming years.
Deluxe, the #1 check printer in the world, shows declining revenue (20% less than last year). Deluxe has long been the dominant printer in this business, but it is vulnerable.
Harland, the #2 company, is doing better, with increases over 20% in gross income over last year. Harland is also diversifying. In 2005, it bought Liberty Enterprises, which sells checks, bank marketing services, and card services ($162 million). It also bought Interleave, a provider of services for small banks $77 million). The company also has its Scantron division, which supplies scannable forms for school testing.
M & F Worldwide is an interesting buyer. It is 38% owned by financier Ron Perelman's MacAndrews & Forbes Holdings Inc. It two other companies right now are Mafco Worldwide, a maker of licorice flavorings, and Clarke American, the #3 US check printer, which also has bank services. As part of a closely-held company, Clarke American's year-to-year performance is not available.
Clarke American has been a hot potato. Founded in 1879, the company ended up being acquired by UK conglomerate Novar plc, which also had assets in building Systems (fire alarms, security systems, environmental controls, and so on) and in aluminum extrusions. Novar was acquired by Honeywell International, the US technology and manufacturing company, which promptly sold off Clarke American M & F Worldwide for $800 million. Now it seems likely that its operations will be merged with those of Harland, taking one more competitor out of the business.
Even in declining industries, the re is growth and there are advantages to getting bigger. It will be interesting to see whether the check operations will be spun off as a public company or maintained as a cash generator by M & F Worldwide.
