Speculation was rife across the Australian ATM industry last night that the sector’s two biggest rivals – Armaguard and Prosegur – had struck a deal to merge their Australian operations.
Banking Day was told by three senior industry sources that the companies were
planning to integrate their respective cash logistics and ATM businesses.
A full merger of the businesses will likely stir opposition from Australian banks because it could potentially establish a monopoly in the cash logistics industry.
Most local banks, including the four majors, rely on either Prosegur or Armaguard to service and replenish their ATMS with notes.
In a significant development last night, Armaguard posted an announcement confirming the merger pact.
“We are pleased to announce that we have reached an agreement with Prosegur
Australia to merge with Armaguard, subject to regulatory approvals, including by the
Australian Competition and Consumer Commission (ACCC),” Armaguard said in the
post.
“The proposal for merger authorisation to be submitted to the ACCC outlines a planned merger of Armaguard and Prosegur in Australia under Armaguard branding, and includes cash in transit (CIT), technical services and ATM networks.
“The proposal does not include entities and services outside Australia.
“The proposed merger represents a significant and positive development in the management of cash in transit and wholesale cash distribution in Australia, and will secure the immediate future of reliable access to cash for the Australian economy.”
Armaguard and Prosegur have been waging a titanic battle for control of the local ATM market since major and regional banks began shedding non-branch machines from their proprietary networks three years ago.
Armaguard now owns and operates ATMs formerly controlled by ANZ, Commonwealth Bank and CUSCAL, while Prosegur bought 20 per cent of Westpac’s fleet of automated tellers in October 2019.
However, Banking Day reported in March that the two rivals had entered exploratory talks with a view to establishing a shared ATM utility in the local market. Those talks have since blossomed into full-blown merger discussions.
The big talking point in the industry yesterday was whether the new merger partners had run their merger plan by the Reserve Bank of Australia and pitched the deal as consistent with central bank’s preference for the local ATM market to operate as a utility.
The hatching of the merger comes as the RBA is conducting a review of banknote distribution arrangements in Australia.
A final report from the review is expected to be released in the next month.
An issues paper floated by the RBA last year raises industry consolidation as a potential development in cash distribution as unit economics of the market were threatened by the growth of digital and other forms of non-cash payment.
“There could be a greater degree of consolidation that results in one main entity being responsible for some or the majority of wholesale cash distribution,” the RBA paper observed.
“This could occur via mergers or acquisitions of distribution participants (by existing participants or a new entrant), or the formation of a utility.”