TAKEOVER:TransCore buying Amtech

John Worthington, president and CEO of TransCore says the acquisition of Amtech will “combine some of the best talent in our industry.” Both companies have strength in system design and operations, though TransCore is larger in that department. Amtech has its line of ETC equipment – several different transponders, readers, lane controllers, etc – as well as a research and development team in RFID that TransCore lacks. There is also a regional aspect with TransCore stronger in the north, and Amtech in the south, of the US.

If the deal goes through, Syntonic, a company going back to the beginning of modern toll roads in their home in Harrisburg, central Pennsylvania will have grown from being a small three-guys-&-a-garage walkie-talkie and two-way radio servicer of the Pennsylvania Turnpike into perhaps the world’s leader in toll systems. Syntonic grew through developing its own business and by acquisitions, then sold itself to SAIC within which TransCore was formed out of the merger of SAIC properties JHK and Syntonic. It only went independent of SAIC last fall.

TransCore with just under 800 employees and $130m business and Amtech with over 500 employees and $80m turnover will form a $210m, 1300 employee company. The combined company will operate out of about 75 locations around North America with four overseas offices. The companies are both geographically dispersed. TransCore has more people in San Diego at its Technology Center than anywhere else though its president & CEO John Worthington and most of the administration occupy a single story building in a quite unglamorous office/industrial park on the eastern fringe of the Harrisburg area. The San Diego facility has built on Syntonics’ acquisition of the Cubic toll equipment business.

Los Alamos Nat Labbers

Amtech comes out of collaboration between a bunch of Los Alamos National Laboratory RFID engineers with Dallas entrepreneur David Cook of Blockbuster Viedo fame, beginning in 1984. Although its name derives from Animal Management TECHnologies because its founders considered making tags for cattle, in fact the company has always been transport-oriented. Its largest facility is in Albuqueque NM and has 250 employees, split about 70 R&D and 180 in manufacturing. Its head office occupies the top floor of a building overlooking the interchange of two toll roads - the Dallas North and the George Bush.

It was on the Dallas North toll road in mid1989 that electronic tolling was taken beyond experimental use and first introduced as a routine way for patrons to pay tolls. Amtech carried all the upfront costs in return for a nickel(5c)/toll fee from the Texas Turnpike Authority. Amtech was the world leader in ET for the first 6 years or so, but its loss to Mark IV in the trials for the IAG’s E-ZPass system changed all that. It continues to be very successful in selling similar RFID tags to railroads around the world.

Ten million tags

Amtech has 10m tags (over half on railroad cars) and 19,000 readers in 32 countries, it says. Amtech was acquired by Unova mid-1998 after a managerial upheaval surrounding the company’s bid for the Florida Sunpass job. In mid-1997 Jeffrey Wetherell, president and COO was fired by the chairman of the board Russell Mortenson. Wetherell was replaced by John Wilson. Mortenson played an increasingly strong role in day to day decisions becoming CEO and president. The company’s finances continued to deteriorate and in a surprise coup Feb 27 1997 the board fired Mortenson.

Unova had taken an equity interest and had board representation. Its people were unhappy with Mortenson. David Cook the founding investor of Blockbuster fame came back for a while as CEO. He said the company’s results were “awful” and “stunk.” $18m was lost on total sales of $116m. Amtech’s stock price slid from over $30 in 1995 to less than $4. Cook set himself the job of finding a buyer for the troubled company. Unova pumped $10m into Amtech Nov 97 to keep it liquid. It ended up with Unova buying the company completely in June 1998. Since then Amtech has been known formally as Intermech/Amtech Systems Division/a Unova Company. (TRnl#26 Apr 98 p1)

Syntonic & Anti-trust?

Syntonic got its big break when it took over from Control Data and IBM after those then major mainframe computermakers had exited tolling. It picked up many of their employees and the toll operations contracts on the Penn and Ohio tunrpikes. It then bought up the remains of ATS and Cubic. They had ceased manufacture of most toll equipment but had valuable ongoing service business.

The press release in its second sentence notes that the transaction will be subject to anti-trust clearance. It is by far the largest and most significant merger of US toll system companies in at least a decade. Amtech and TransCore have many times bid against one another for system integration and service work, so the merger will end that competition. Against that it can be argued that there is plenty of competition. CS Route through TDC/InTrans and Parsons Transp Group have recently emerged as new competitors, even as Lockheed and Raytheon seem to be retreating from the business. HNTB, Parsons Brinckerhoff, Castle Rock, Sirit, Ascom. Autostrade, Kapsch, Mitsubishi, Denso, Tadiran, SICE and a score of others could easily enter a market where if anything, the contenders have probably been competing too fiercely for work. Indeed Amtech lost its corporate independence largely because of underpricing its SunPass work in Florida.

TransCore has been a big supporter of Mark IV ETC systems, being the integrators for ISTHA, Mass Pike, Tobin Br, Penn Pike, Powhite Pwy Ext, WV Turnpike. As the system integrator for ISTHA, TransCore was active in getting it to switch from AT/Comm to Mark IV in 1996/97. At the turn of the year TransCore was also working with the Oklahoma Turnpike on plans to move it in the direction of replacing an Amtech system with a Mark IV system. Now it is on the verge of owning the guys it was proposing to throw out!

Once TransCore has its own line of ETC equipment it loses its credibility as an independent integrator that can choose between equipment of different suppliers. It had that problem with coin machines. For example it has been reported in one project that there were tests showing French coin machines were a better buy than TransCore’s Australian-made machines but with TransCore the integrator its machines won out!

Still, business is very adaptable and fierce competitors one day can the next day be close collaborators, when they need to. Soon after Amtech had been beaten by Mark IV for the big Inter-Agency Group contract mid-decade, it bid for system integration at the Triborough (MTA B&T) ETC conversion and integrated Mark IV ETC systems for that client. So, TransCore will argue, it is quite capable of recommending Mark IV ETC gear in North America or Kapsch/Combitech equipment in Europe against its Amtech ETC line. Whether customers will believe that... who knows?

ITS

John Worthington and others in the two companies are very strong believers in the broader area of ITS (Intelligent Transport Systems so-called) and of using the same vehicle-to-roadside radio communications (VRC) incorporated into toll transponders for a broad range of traveler information services, safety applications, traffic management services, law enforcement and regulatory activity, as well as e-commerce.

The press release quotes Worthington: “The common vision and combined strength of these companies will better serve our traditional clients in the transp industry and enable us to more quickly merge e-commerce applications with ITS-based technology to more directly benefit commercial customers and consumers throughout the world.”

Here in north America most major first generation ETC systems are built, or commited. Second generation systems will be slow until mid-decade. But there are major opportunities for international companies in Asia, Europe, Australia and South America.

Competition in north America for ETC could be diminished by the TransCore/Amtech merger, by the serious problems at MFS/Adesta, and also by the possible exit of Lockheed and Raytheon. Equipment suppliers may seek new alliances with system integrators. But major international companies can enter, or quickly increase their activity. It is increasingly a world economy. And the hightech transp business can change rapidly and unpredictably through innovation and entrepreneurship from unexpected quarters – additional considerations that the trust-busters at the Justice Dept will have to come to grips with if they are not to be obstructive pests.

TransCore & Unova to remain thick

TransCore says it is acquiring Amtech’s Albuquerque NM engineering and manufacturing and intends to support the present Amtech product line and to develop new products and applications based on the patents and intellectual property rights being acquired with Amtech. However the ‘Intellitag’ (R in a circle) technology will remain with Unova/Intermech. TransCore will become the exclusive reseller of the ‘Intellitag’ RFID technology for tolling, traffic management and other transport-related applications. The ‘supply chain’ or ‘asset management’ RFID applications that involve IBM’s sticker type buck-a-tag technology will continue to be developed and sold by Unova’s Intermech subsidiary. These are thought likely to gradually supplement, and in some applications, displace, laser/barcode stickers which are printed and applied by the billions on products for automatic identification – as at most supermarket and other retail checkouts. An Intermec group in New York, acquired from IBM will do most of the work on these sticker-tags.

The announcement says that TransCore and Unova/Intermech will collaborate closely in the future. As part of the Amtech sale Unova is acquiring an equity stake in TransCore, the size of which is not yet determined, but which is described as a “minority equity position in the combined (TransCore/Amtech) company.” Unova’s Intermech will “develop next-generation RFID tags and ITS equipment for TransCore based on its Intellitag technology.” This suggests that TransCore’s Albuquerque NM facility will concentrate more on manufacturing and less on new product development.

The companies say they will work together to help achieve “global standards for the worldwide RFID market.”

The Unova/Intermech Intellitag line announced in Oct 99 includes a dual-mode barcode/RFID sticker-tag. The tag elements operate around 2.45GhHz and in the 868-915MHz areas of the RF spectrum. They allow read zones to a distance of 10m, multi-tag sorting at rates to 50 tags/sec, read/write capabilities and “much greater” memory than the ‘proximity’ tags or smartcards. The system deploys spread-spectrum frequency hopping, and the one operating in the higher frequency range could therefore be adapted to the much-touted Bluetoooth wireless networking specifications.

The Intellitag line - not to be confused with a transponder of the same name developed by Amtech in 1996 but since superceded – is a single chip, single antenna (transmit/receive) technology. This drives cost way down. It claims to have been the first product on offer complying with the dpANS T6.256 standard for item ID applications.

So much for 5.8 and 5.9Ghz fixed spectrum for ITS? (TransCore 703 821 5791 Unova 818 992 2870)