PDNB's kiosk, ATM services purchased by U.S. Bank | ATMs

PDNB's merchant processing, prepaid/stored-value cards and ACH services are not part of the deal. And financial terms of the sale, which is expected to close by late third-quarter or early fourth-quarter 2008, were not disclosed.

About 60 PDNB employees are expected to become part of Elan Financial Services, including key executives such as Sandra Hartfield, the president and chief executive of PDNB's Electronic Banking Division. Elan also plans to maintain PDNB's operations centers in Palm Desert, Calif., and Lafayette, La., where PDNB offers complete terminal-management and vault-cash solutions to financial institutions and independent sales organizations.

A changing industry

The sale marks a turning point for both companies — for U.S. Bank, a sign of continued growth; for PDNB, the ending of an era.

For the last three years, U.S. Bank's Elan, founded in 1997, has been on a buying spree to bulk its ATM-services portfolio. In May 2005, U.S. Bank acquired Genpass Technologies, operator of the MoneyPass, MoneyMaker and Money Belt ATM networks. The purchase made Elan the second-largest third-party ATM processor in the United States — second only to Colorado-based First Data Corp., which operates the STAR Network.

Elan operates more than 37,000 ATMs nationwide.

This deal with PDNB, says Gary Staub, Elan's executive vice president for strategic initiatives, offers similar rewards.

"We believe this deal makes us the largest provider of ATM and kiosk vault cash in the United States," Staub said. "We definitely have a solid presence in the ISO business now. The goal is to grow our payments business, and this deal expands our product offering."

For PDNB's Electronic Banking Division, founded in 1994, the sale marks a turning point, one that will take it from being a leader in vault-cash services for independent ATM operators to a provider of targeted services, such as prepaid and stored-value cards — which, among other things, target cash-preferred/underserved consumers.

PDNB is best known for its reverse-cash methodology — part of its TRAKKERSM software program, which automates backroom management, from cash forecasting and ordering to reconciliation and settlement. The system helped to revolutionize cash services for the ATM and kiosk industry.

The reverse-cash service developed by PDNB enabled deployers to provide more advanced financial self-service solutions, such as bill payment, which targets underserved consumers who prefer to use cash to pay bills.

"Palm Desert National Bank has been a pioneer in the ATM industry and we are proud of the part we have played in the ATM industry's growth," Hartfield said. "We have always been committed to providing exceptional products and service."

The sale to U.S. Bank, Hartfield says, will allow Elan to offer more comprehensive services to the industry.

PDNB's cash services helped fuel growth in the late 1990s for newcomers like Burnaby, British Columbia-based TIO Networks Corp., a billpay service provider that has worked closely with PDNB's Electronic Banking Division since its inception.

But Hamed Shahbazi, chairman and chief executive of TIO Networks, says the sale to U.S. Bank is a good and merely supports PDNB's desire to focus on "growth" businesses, like prepaid/stored-value services.

"I think a lot of this comes down to where the ATM industry stands currently, and vault cash not being a growth business," Shahbazi said. "I think it's an excellent event for the industry. Bringing together the two key innovators for vault cash, and eventually the whole back-office of the ATM, at a time when I think the industry needs leadership and innovation more than ever, brings together a lot of leadership to one company. All in all, two thumbs up. We love it."

Sam Ditzion, chief executive of Boston-based Tremont Capital Group, a strategic-planning, merger and acquisition ATM consultancy, says the deal is further example of the industry's consolidation.

"This transaction represents yet another example of the significant and continuing consolidation in each and every sector within the ATM industry," Ditzion said. "Stay tuned, as there will be much more to come."

Ditzion agreed that the deal may reflect PDNB's interest in other business opportunities.

"This is a very significant acquisition, as it clearly solidifies Elan's position as the overwhelmingly dominate player in the nation's non-bank ATM-vault-cash space," he said. "This deal might also be an indication that Palm Desert has reduced its appetite for risk and could reflect a decision to focus more on its core and higher growth businesses.”