ME/6648/16 COMPLETED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF DIRECTCASH PAYMENTS INC. BY CARDTRONICS PLC NOTIFICATION TO THE COMPETITION AND MARKETS AUTHORITY dated 9 February 2017 S TABLE OF CONTENTS NOTES Pages EXECUTIVE SUMMARY...................................................................................................................9 GENERAL INFORMATION ............................................................................................................27 THE MERGER SITUATION............................................................................................................27 JURISDICTION..................................................................................................................................30 SUPPORTING DOCUMENTS..........................................................................................................31 COUNTERFACTUAL .......................................................................................................................33 MARKET DEFINITION ...................................................................................................................34 HORIZONTAL EFFECTS ................................................................................................................56 INCREASE IN THE MERGER PARTIES' BUYER POWER......................................................88 LOSS OF POTENTIAL COMPETITION .......................................................................................89 COORDINATION ..............................................................................................................................89 VERTICAL EFFECTS.......................................................................................................................89 CONGLOMERATE EFFECTS ........................................................................................................90 ENTRY OR EXPANSION .................................................................................................................90 COUNTERVAILING BUYER POWER ..........................................................................................90 EFFICIENCIES AND CUSTOMER BENEFITS............................................................................91 OTHER INFORMATION..................................................................................................................91 8603816-v9\LONDMS 2 S FIGURES FIGURE 1: MARKET SHARES BY ATM CASH WITHDRAWALS .........................................11 FIGURE 2: SHARES OF SUPPLY BY NUMBER OF FTU ATMS DEPLOYED ......................19 FIGURE 3: MARKET SHARES BY ATM CASH WITHDRAWALS .........................................20 FIGURE 4: SHARES OF SUPPLY BY NUMBER OF FTU ATMS DEPLOYED ......................21 FIGURE 3A: DCP LINES OF BUSINESS.......................................................................................29 FIGURE 12A: METHODS OF MAKING SPONTANEOUS PAYMENTS (BY NUMBER OF TRANSACTIONS)..............................................................................................................................35 FIGURE 12B: NUMBER OF CONSUMER CASH WITHDRAWALS VIA DIFFERENT METHODS IN 2015............................................................................................................................35 FIGURE 12C: VOLUME OF CASH WITHDRAWALS - ON-US VS NOT-ON-US (LINK) TRANSACTIONS...............................................................................................................................36 FIGURE 12D: ILLUSTRATIVE PROCESS FOR THE WITHDRAWAL OF CASH FROM AN ATM...............................................................................................................................................37 FIGURE 12E: DESTINATIONS OF ATMS....................................................................................38 FIGURE 12F: USE OF CASH (AS A PERCENTAGE OF TOTAL VOLUME OF PAYMENTS).......................................................................................................................................41 FIGURE 12G: NUMBER OF MACHINES SPLIT BY CHARGING METHOD AND LOCATION.........................................................................................................................................42 FIGURE 15A: MARKET SHARES BY ATM CASH WITHDRAWALS ....................................63 FIGURE 15B: CARDTRONICS' VIEW OF COMPETITIVE LANDSCAPE (NUMBER OF ATMS)..................................................................................................................................................66 FIGURE 15C: SHARES OF SUPPLY BY NUMBER OF FTU ATMS DEPLOYED .................67 8603816-v9\LONDMS 3 S TABLES TABLE 1: POTENTIAL SEGMENTATION OF THE ATM DEPLOYMENT MARKET........13 TABLE 2: MARKET SHARES BY ATM CASH WITHDRAWALS ...........................................16 TABLE 3: COMPARISON OF SHARES OF SUPPLY..................................................................17 TABLE 4: SUMMARY - SHARES OF SUPPLY BY NUMBER OF ATMS DEPLOYED.........18 TABLE 5: SUMMARY OF THE PARTIES' COMPETITIVE POSITIONING .........................21 TABLE 6: OCCASIONS THAT OTHER ATM DEPLOYERS BID WHEN CARDTRONICS BIDS .....................................................................................................................................................22 TABLE 12A: LINK INTERCHANGE FEES...................................................................................37 TABLE 12B: TYPES OF SERVICE MODEL.................................................................................39 TABLE 12C: POTENTIAL SEGMENTATION OF THE ATM DEPLOYMENT MARKET...43 TABLE 12D: CHANGES IN WITHDRAWAL VOLUMES ..........................................................46 TABLE 12E: PAYMENTS UK CATEGORISATION OF LINK DESTINATION TYPES .......50 TABLE 12F: PRESENCE OF COMPETITORS IN POSSIBLE SEGMENTS OF THE ATM DEPLOYMENT MARKET ...............................................................................................................53 TABLE 12G: CARDTRONICS' AVERAGE GROSS PROFIT MARGINS BY REGION ........82 TABLE 12H: DCP'S AVERAGE GROSS PROFIT MARGINS BY REGION............................83 TABLE 14A: CARDTRONICS CONTRACTS WON THROUGH TENDERS...........................58 TABLE 14B: DCP CONTRACTS WON THROUGH TENDERS ................................................58 TABLE 14C: TYPICAL KEY CONTRACT TERMS ....................................................................60 TABLE 15A: COMPARISON OF SHARES OF SUPPLY.............................................................62 TABLE 15B: MARKET SHARES OF THE UK ATM DEPLOYMENT MARKET (BY NUMBER OF ATM CASH WITHDRAWALS)..............................................................................64 TABLE 15C: SUMMARY - SHARES OF SUPPLY BY NUMBER OF ATMS DEPLOYED....65 TABLE 15D: SHARE OF SUPPLY OF FTU ATMS DEPLOYED BY PAYMENTS UK DESTINATION SEGMENTS............................................................................................................68 TABLE 15E: SHARE OF SUPPLY OF PTU ATMS DEPLOYED BY PAYMENTS UK DESTINATION SEGMENTS............................................................................................................69 TABLE 15F: ATM DEPLOYMENT IN THE MERCHANT "MARKET" (BY NUMBER OF ATMS)..................................................................................................................................................70 TABLE 15G: IAD DEPLOYMENT (BY NUMBER OF LINK ATM WITHDRAWALS) .........71 TABLE 15H: DEPLOYMENT AT SUPERMARKETS, CONVENIENCE AND OTHER RETAIL PAYMENTS UK SEGMENT DESTINATIONS (BY NUMBER OF ATMS)..............72 TABLE 15I: DEPLOYMENT AT SOCIAL AND LEISURE PAYMENTS UK SEGMENT DESTINATIONS (BY NUMBER OF ATMS) .................................................................................73 8603816-v9\LONDMS 4 S TABLE 15J: DEPLOYMENT AT MOTORING AND TRANSPORT PAYMENTS UK SEGMENT DESTINATIONS (BY NUMBER OF ATMS).............................................................74 TABLE 15K: DEPLOYMENT AT SERVICES, MOBILE AND WORKPLACE PAYMENTS UK SEGMENT DESTINATIONS (BY NUMBER OF ATMS) ..............................75 TABLE 15L: SUMMARY OF THE PARTIES' COMPETITIVE POSITIONING.....................76 TABLE 15M: GENERALLY DE MINIMIS INCREMENTS BETWEEN THE PARTIES.......77 TABLE 15N: PROPORTION OF OCCASIONS THAT OTHER ATM DEPLOYERS BID WHEN CARDTRONICS BIDS.........................................................................................................77 TABLE 15O: ANALYSIS OF RANK OF BIDDERS......................................................................78 TABLE 15P: PRESENCE OF COMPETITORS IN OVERLAP TENDERS...............................78 8603816-v9\LONDMS 5 STRICTLY CONFIDENTIAL | CONTAINS BUSINESS SECRETS SUPPORTING DOCUMENTS ANNEX 2A ARRANGEMENT AGREEMENT AMONG CARDTRONICS HOLDINGS LIMITED AND DIRECTCASH PAYMENTS INC. DATED 3 OCTOBER 2016 ANNEX 2B CARDTRONICS' ORGANISATIONAL STRUCTURE (PRE TRANSACTION) ANNEX 2C CARDTRONICS' ORGANISATION STRUCTURE (POST TRANSACTION) ANNEX 4A CARDTRONICS' CO-OP INVESTMENT CASE REVIEW ANNEX 4B CARDTRONICS' LLOYDS ACQUISITION SLIDES ANNEX 8A CARDTRONICS' FORM 10-K ANNUAL REPORT 2016 ANNEX 8B DCP ANNUAL INFORMATION FORM 2015 ANNEX 8C CARDTRONICS' FORM 10-Q QUARTERLY REPORT ANNEX 8D DC PAYMENTS Q3 2016 MANAGEMENT ACCOUNTS ANNEX 8E CARDTRONICS' LRP MASTERFILE 21 JULY 2016 ANNEX 8F DCP CONFIDENTIAL INFORMATION MEMORANDUM ANNEX 9A PROJECT ALPHA PRESENTATION FOR BOARD MEETING ON 8 OCTOBER 2016 ANNEX 9B PROJECT ALPHA BOARD UPDATE 10 OCTOBER 2016 ANNEX 10A ATM INNOVATION RESEARCH