FUJITSU WINS U-SCAN BUSINESS 2004-04-19 (1)

MICHAEL GARRY

FRISCO, Texas -- Fujitsu Transaction Solutions here last week announced it had completed its acquisition of Optimal Robotics' U-Scan self-checkout business, which NCR had agreed in principle to buy in February.

Fujitsu said it paid $35 million in cash and an assumption of liabilities for the 13-year-old self-checkout line created and marketed by Optimal, based in Montreal.

Those liabilities included a $3 million termination fee Optimal owed NCR for canceling the original deal, as well as "reasonable costs in obtaining shareholder approval of the transaction," according to a statement from Optimal. Optimal shareholders approved the Fujitsu deal April 6.

Fujitsu originally announced April 5 that it had reached a "definitive agreement" to acquire the U-Scan line. NCR, Dayton, Ohio, promptly responded with a counter-offer of $38 million. In February, NCR announced an agreement in principle to buy the U-Scan business for $30 million, plus assumption of liabilities -- a deal NCR had expected to close on April 9.

"Optimal is delighted that it is Fujitsu in particular who has acquired our self-checkout assets because they provide the best possible future for our employees and customers," said Neil Wechsler, co-chairman and chief executive officer, Optimal, Montreal, in a statement. Optimal said it had "provided notice to NCR Corporation of the termination of the previously announced agreement."

NCR said last week it is "reviewing the situation, and considering our next steps," according to Jeffrey Dafler, NCR spokesman. In raising its bid to $38 million on April 5, NCR said in a statement that "it is incumbent upon the Optimal Board of Directors to fulfill its fiduciary responsibilities, and duly consider NCR's offer."

NCR also said "acceptance of the NCR offer will eliminate anticipated legal action by NCR against Optimal and others related to Optimal's solicitation of a $35 million offer from Fujitsu." NCR called Optimal's actions regarding Fujitsu "improper and in breach of its legal obligations."

Assessing the situation last week, Greg Buzek, president, IHL Consulting Group, Franklin, Tenn., said, "It isn't over, but it looks 95%-plus that Fujitsu won."

If Fujitsu's acquisition does hold, NCR would still have the most market share in the burgeoning self-checkout market, followed by Fujitsu and IBM, he said. Last November, IBM purchased Productivity Solutions Inc., which, like Optimal, was a small company that had helped launch the self-checkout market.

Buzek said he thought retailers preferred Fujitsu acquiring the U-Scan line because "having three competitors in the market should make for lower prices than if only IBM and NCR were left." Currently, he noted, "these systems are too expensive for retailers." Buzek noted that PSI and Optimal needed to sell their self-checkout businesses because "neither had a [traditional] POS installed base, so they were always trying to break in against incumbents that had a full-store solution."

The self-checkout arena has become extremely attractive of late. IHL Consulting's most recent study of the self-checkout market, "Retail Self-Checkout Systems in North America, 2003," reported that shipments of self-checkout systems will grow by about 95% in 2004, with the market exceeding $1.3 billion in 2005. Buzek estimates that 95% of supermarket chains in North America will have some degree of self-checkout in 2006.

Fujitsu will market self-checkout systems to independent grocers and small chains through StoreNext Retail Technologies, a 50/50 joint venture between Fujitsu and Retalix. In announcing the deal with Fujitsu, Optimal said it was renaming itself Optimal Group, consisting of two subsidiaries: Optimal Payments and Optimal Services Group.