BancTec to merge with NYC investment firm

Struggling BancTec has announced plans to merge with Welsh, Carson, Anderson & Stowe (WCAS, New York), a NYC private investment firm in healthcare and information services.

The deal is valued at approximately $525 million, including BancTec's debt of about $150 million. In conjunction with the transaction, BancTec is expected to issue an additional $235 million in new debt.

BancTec will operate within a division of WCAS as an independent company under its current name and management. The merger is expected to be completed during the third quarter of this year, pending shareholder approval.

The deal legitimizes concerns that BancTec suffered a fatal blow with last month's partnership between NCR and Check Solutions, according to Lighthouse Consulting analyst Ray Edwards.

"Whenever markets evolve and change in terms of needs and technologies, there are winners and those who don't win," said Edwards. "BancTec is now in the latter category."

International rating agency Fitch IBCA agreed, placing a negative alert on its long-term rating for BancTec due to the perceived increase in debt.

BancTec is caught in a fiercely competitive industry moving rapidly away from paper-based processing systems, according to Nancy Thornton, president of consulting firm centos. "With payments increasingly moving towards E-commerce solutions, financial services organizations like BancTec are likely attempting to re-define their role in the market," she said.

BancTec missed an opportunity to leverage its Plexus technology towards financial industry-specific solution, she added

"They still need to create high-performance storage management system for their image-based products, an area that proved quite lucrative for may of Plexus' early integration partners," she said.

Edwards was quick to note that the merger could be the beginning of a turnaround for BancTec, providing new blood, new direction and a shoring up of the organization from a financial perspective.

"I hope that this move is an indicator that the right elements are coming into play to reposition BancTec to be a strong player as they once were," he said.

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