Armaguard/Prosegur Merger Goes Ahead

The Australian Competition and Consumer Commission (ACCC) has finally approved the merger of Australia’s two largest cash in transit companies – Linfox Armaguard and Prosegur Australia. The merger will create a single cash logistics provider, operating under the Armaguard name, with an estimated market share of more than 90%.

The complex nine-month long review saw the competition authority gather more than 80 submissions, 13 witness statements and four expert reports, forcing them to extend their decision-making deadline several times.

Industry in decline, cash remains crucial

The review concluded that the Australian CIT industry is in structural decline due to the decreasing use of cash, but noted that it continues to be crucial to some parts of the economy.

Commenting on the decision, ACCC Commissioner Liza Carver said: ‘we accepted that, without the proposed merger, it was highly probable either Armaguard or Prosegur would withdraw from the declining cash-in-transit market in the near future and this exit could occur very quickly. We were concerned that the rapid exit by either of these two major suppliers could cause significant disruption, including by reducing the availability of cash to their customers, and therefore the public.’ 

She acknowledged that the proposed merger could substantially reduce competition, and a number of competitors and customers had raised this concern, along with the threat of potential price rises which it could cause.

To address these fears the ACCC will impose a series of obligations on the combined business that will be effective for the next three years.

Three-year competition undertaking

The undertaking sets out a number of obligations. The company will be required to continue offering CIT services to all locations that are currently serviced. Current pricing must be honoured for existing customer contracts and new customers. Contract price rises must be capped at not more than the increase in the Australian Consumer Price Index (CPI) plus 7.5% annually.

Both companies have sustained considerable losses under current trading conditions. In their response to these obligations, they claimed that even with this level of price increase, the combined business would not break even over the three-year term of the agreement, reinforcing the challenging state of the cash logistics business and the need for longer term solutions to secure cash distribution, access and acceptance.

Additionally, the company must establish a register of assets that include surplus Approved Cash Centres, surplus equipment and a register of former personnel to assist other companies that might seek to acquire these assets to grow their own businesses.

The undertaking also sets out various requirements to enable third parties, including independent ATM deployers, to have access to approved cash centres and to provide a range of ATM specific and cash processing services.

To support the agreement the company must follow a formal complaints handling process, appoint an independent expert to adjudicate disputes and also appoint approved independent auditors.

ATMX and Precinct – more than just ATMs?

A feature of the declining transactional use of cash and the growth of digital payment and banking alternatives has been the widespread closure of bank branches and bank ATMs in Australia.

The Australian Prudential Regulation Authority (APRA) reports that over the five years to June 2022, bank branches have declined by 30% in major cities and by 29% in regional and remote areas. The number of ATMs in Australia have declined by approximately 20% since their peak in 2016; as of March this year they numbered around 25,000.

Both Armaguard and Prosegur have developed their own ATM networks, Armaguard acquiring ATMs from ANZ and Commonwealth banks as well as incorporating the Cuscal owned rediATM network under their ATMX brand.

At Prosegur, the company has rebranded the offsite ATMs they acquired from Westpac Group in 2019 as Precinct, an offering styled as more than just an ATM network, but a multi-bank solution. From this year Prosegur is also starting to offer Courier and Access Hubs from their cash centres under the Precinct banner.

With Westpac Group recently extending the existing fee free access for its banking customers at Precinct ATMs to ATMX ATMs as well, it will be interesting to see if the merger will result in a single ATM network, or whether the two brands can co-exist.

Commenting on the merger, Linfox Armaguard CEO, Mick Cronin said: ‘we are delighted that the ACCC recognises the important role Armaguard and Prosegur Australia play in the ongoing circulation of cash in our economy.

‘The 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.’ 

A transition programme is now underway, and the first day of the merged entity is expected to be 1 September 2023.