Cardtronics Raises $75M, Nixes IPO

Cardtronics Group Inc. knows how to dispense cash, and it knows how to raise money, too. The Houston-based company, which provides ATM machines and other credit and debit card services, last week raised $75 million from TA Associates.

The funding deal came less than a week after Cardtronics withdrew registration papers for a proposed $115 million IPO. The company would seem to have all the makings of a good candidate to launch a public offering.

As part of its acquisition strategy, the company has acquired eight ATM networks in recent years. As of a year ago, the company owned more than 12,000 of the cash machines, up from about 3,300 three years prior. Then, in June of 2004, Cardtronics announced it would acquire the ATM business of E-Trade Access Inc. in a $106 million deal that more than doubled the number of cash machines in the Cardtronics network to about 25,000.

Cardtronics says its sales grew from $45 million in 2001 to $195 million last year. The company’s path to an IPO was delayed by its E-Trade acquisition. It may also be that the cash from TA Associates – which had approached Cardtronics three years ago with an offer to invest – was too good to pass up.

For a company like Cardtronics to decide to go back to the private equity market rather than go public should not come as a surprise, says John Fitzgibbon, an analyst with online IPO reporting firm IPO Desktop. Going back to private equity reduces risk and allows for a stronger IPO in the future, he says.

“With VCs, you know what you got,” Fitzgibbon says. “Raising capital is the higher priority. With the $75 million you’ll have a stronger company to go public at a later time.”

Cardtronics had raised more than $15 million from CapStreet Group in 2001, according to The MoneyTree Survey from PricewaterhouseCoopers, Thomson Venture Economics (publisher of PE Week) and the National Venture Capital Association. CapStreet still owns a stake in the company. CapStreet and TA Associates together own about 70% of Cardtronics.

“The funding deal has all of the benefits of an IPO without any of the downsides involved with going public,” says Michael Wilson, a managing director with TA Associates, who is joining Cardtronics’ board of directors along with fellow TA Managing Director Roger Kafker.

Wilson credits the more stringent requirements of the Sarbanes-Oxley legislation with making private equity more appealing to companies considering going public.

“I’ve had another opportunity recently where the IPO was an option, but the CEO didn’t want to be a public company CEO,” Wilson says. “It definitely tilted the company towards private equity.”