The tollgate may be coming down on the company behind E-ZPass.
Mark IV Intelligent Vehicle Highways System is in danger of losing its 15-year-old government contract because its private-equity owners starved the company of research dollars, putting the firm behind rivals that are looking to snatch the valuable contract when it expires in August 2010, according to a source who is deciding whether to renew with Mark IV.
Once a publicly traded company, Mark IV was taken private in 2000 by London-based buyout shop BC Partners for about $2 billion. The company, which makes auto parts in addition to the E-ZPass system, was then sold to private-equity firm Sun Capital Partners last year.
Sources said Mark IV under BC Partners’ ownership didn’t get much in the way of research dollars, putting it at a disadvantage to other companies that offer similar technology. In April, Mark IV filed for Chapter 11 bankruptcy protection, though the toll-collection business was not part of that filing and is now run independently of Mark IV.
Yet even though the toll-collection operation isn’t involved in the bankruptcy, it faces big challenges.
Mark IV hasn’t updated its technology in a meaningful way since it got the original contract 15 years ago, and rival shops have cropped up with offerings that could render Mark IV’s technology obsolete.
“We are working with the same technology we had in 1994,” said the source.
What’s at stake is a four-year contract that covers 14 states from Maine to Virginia, and serves some 10 million accounts.
The multi-state Inter Agency Group, whose 25 members include the MTA, Port Authority and New York State Thruway Authority, is currently preparing to run tests of Mark IV’s incumbent technology against an electronic toll-collection service run by Roper Industries’ TransCore unit.
TransCore offers transponders that can handle simultaneous functions, such as reading citizenship information at the US-Canada border at the same time it’s collecting tolls.
The Pennsylvania-based firm also offers sticker tags, which cost about half as much to buy as Mark IV’s windshield transponders. However, even if the Inter Agency Group chooses TransCore, it will continue to use the windshield transponders.
“I’m concerned they are an asset of a company in bankruptcy,” said the source, who is part of the contract-reviewing process, who blamed Mark IV’s troubles on the private-equity firms loading up the company with debt to fund the buyouts.
Mark IV chief Chris Murray declined to comment, and a company spokeswoman did not return a call seeking comment.
Another source said Murray, who joined Mark IV last December, is expected to retire at year’s end.
