Bloomberg News

Quandt Family Buys Entrust in Shift From Card Swipes to Online

December 17, 2013

The billionaire Quandt family’s Datacard Group agreed to buy Entrust Inc., a maker of identity management and authentication software, to meet increased demand for security as more business goes digital.

Datacard, a plastic-card printing supplier based in Minnetonka, Minnesota, is paying $500 million in cash for Entrust, according to two people with direct knowledge of the matter who asked not to be identified because the terms are private. Germany’s Quandt family also holds a controlling stake in luxury-car maker Bayerische Motoren Werke AG. (BMW)

Datacard supplies banks and governments with machines to print, emboss and package credit cards and official documents such as passports and drivers licenses. Many of those customers are moving to digital technology, seeking to cut costs and meet growing demand for online and mobile transactions.

“Our business model has for decades been about enabling secure transactions, starting from the physical ID and moving to the digital ID,” Datacard Chief Executive Officer Todd Wilkinson said in a telephone interview from Ottawa. “Entrust comes at it from the other side. Together, we can cover a wider swath of the ecosystem.”

U.S. e-commerce spending will expand by almost 14 percent a year through 2017 to $440 billion, according to estimates by eMarketer Inc. Entrust makes software to recognize and authorize digital keys, codes and credentials on-site or remotely, addressing the risk of identity theft that confronts businesses and consumers online.

Between them, Entrust and Datacard said they manage billions of electronic identities, including the majority of credit and debit cards in more than 100 countries.

‘Wealth Builders’

“This is about the next generation for finance,” Entrust CEO Bill Conner said in an interview in New York. “Your phone becomes a virtual smartcard.”

Datacard played a key role in the adoption of plastic as a replacement for cash, introducing the first system to print personalized credit cards with magnetic strips in high volumes.

The Quandts, who have a fortune of more than $40 billion according to the Bloomberg Billionaires Index, bought Datacard in 1987. Wilkinson said Stefan Quandt, 47, the majority shareholder who represents the family on Datacard’s board, is encouraging the company to use its cash for acquisitions.

“They’re generational wealth builders,” he said. “They have a long-term view.”

Wilkinson, who joined Datacard from General Electric Co. (GE:US) in 2005, declined to comment on the price being paid for Entrust. He said Datacard has about $500 million in annual sales and a “strong balance sheet.” Its customers include JPMorgan Chase & Co. (JPM:US), Citigroup Inc., Wells Fargo & Co. (WFC:US) and the governments of France and Canada.

Cloud Services

Entrust was spun off from Canada’s Nortel Networks Corp. (NRTLQ:US) in 1997 and at its peak during the dot-com bubble had a market value of $4.4 billion. In 2009 it was bought by private-equity firm Thoma Bravo LLC for $124 million.

The Dallas-based company has since focused on cloud-based services and now generates about $120 million in annual revenue, up from $96.5 million in its last 12 months as a public company. Earnings before interest, taxes, depreciation and amortization have increased to about $40 million, according to the two people familiar with the deal.

Chertoff Capital and Centerview Partners were financial advisers to Entrust.

To contact the reporter on this story: Erik Schatzker in New York at eschatzker@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net


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