Federal regulators are seeking to block VeriFone Systems Inc.'s proposed purchase of rival electronic-payment provider Hypercom Corp.
The Justice Department on Thursday filed a civil antitrust lawsuit in federal district court to stop the deal, warning it would harm competition in the market for point-of-sale terminals in the U.S. Such terminals are used by retailers and other firms to accept electronic payments with credit cards and debit cards.
VeriFone Systems, based in San Jose, Calif., announced plans to buy Hypercom in November in an all-stock deal valued at $485 million, including $65 million of debt.
Christine Varney, head of the Justice Department's antitrust division, said that allowing VeriFone to buy Hypercom would likely drive up prices for point-of-sale terminals since the two companies together control more than 60 percent of the U.S. market for terminals used by the largest retailers.
Last month, Hypercom, of Scottsdale, Ariz., said it would sell its U.S. payment systems business to France's Ingenico SA for $54 million in cash to alleviate antitrust concerns about the deal with VeriFone. VeriFone would then acquire Hypercom's networking products operations.
But that was not enough to satisfy the Justice Department since Ingenico is the only other significant provider of point-of-sale systems in the United States.
The sale of part of Hypercom's business to Ingenico, the Justice Department said in a suit filed in U.S. District Court in Washington, D.C., would not create a new, independent competitor in the market and would make it easier for VeriFone and Ingenico to coordinate pricing for point-of-sale terminals.
"The proposed divestiture does not resolve the significant competitive concerns posed by the merger, and in some ways exacerbates them," Varney said in a statement.
In a joint statement, VeriFone and Hypercom said they intend to work with the Justice Department to better understand its concerns and will consider other potential divestitures of Hypercom's operations, including a possible sale to a different buyer, to make the deal more palatable to the government. They said they believe the transaction can be completed in the second half of the year.
"The companies continue to believe in the compelling benefits that the merger will provide," the statement said.
VeriFone shares fell $3.36, or 6.7 percent, to close at $46.64. Hypercom's stock lost $1.30 to close at $9.59.