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CheckFree Buys E-Billing Firm from Microsoft, First Data

Online billing leader CheckFree late Tuesday night bought TransPoint, the e-billing and payment child of First Data Corp. and Microsoft Corp. in a stock deal worth about $1.1 billion.

CheckFree (CKFR) will fork over 17 million shares of stock for TransPoint. When the transaction closes, Microsoft (MSFT), First Data (FDC)and Citibank together will own 23 percent of CheckFree. The transaction will be accounted for as a purchase by CheckFree and is expected to be final in four to six months.

CheckFree and TransPoint will join their technologies and resources to quicken the pace at which people move from traditional payment methods to the Web. To do this, CheckFree said it would operate a single unit to streamline use for home-based consumers paying via the Net. Also, banks, brokerages and portals can deliver bills from the combined biller bases of TransPoint and CheckFree without having to implement duplicate systems.

CheckFree Chairman and Chief Executive Officer Pete Kight said the company's goal is to reach 30 percent of U.S. households receiving and paying bills online by 2003. In the corporate sector, nearly 80 billers already make electronic bills available online through either CheckFree or TransPoint. These include AT&T, MCI Worldcom, GTE and Qwest Communications.

The deal involves a number of additional stipulations:

  • CheckFree will receive an exclusive five-year relationship with Microsoft to provide electronic billing and payment technology used in applications and services Microsoft develops. During that time, Microsoft will guarantee a minimum of $120 million in revenue to CheckFree.

  • First Data also will enter into a five-year relationship with CheckFree, during which time First Data and CheckFree will market and use each other's products and services. First Data will provide at least $60 million in revenue and/or cost savings to CheckFree. First Data will sell CheckFree's electronic billing and payment services to its customers. To further improve operating costs, CheckFree will use First Data's electronic biller connections and range of electronic payment products and services.

  • Prior to closing the transaction, Microsoft, First Data and Citibank will collectively contribute $100 million to TransPoint, which will be transferred to CheckFree at closing.

  • Microsoft and First Data each will gain a seat on CheckFree's board of directors. Selected for the positions are Ric Duques, chairman and CEO of First Data Corp., and Lewis Levin, who in addition to being president and CEO of TransPoint is a vice president at Microsoft.

Intuit Inc., which is a TransPoint partner and has a minority ownership position in CheckFree, voiced support for combining the companies, citing interoperability as a key benefit.

"Intuit believes the combination of CheckFree and TransPoint is a very positive move for the acceleration of electronic billing and payment," said Bill Campbell, chairman of Intuit (INTU). "Through our relationship with CheckFree, Quicken.com and its customers will be strong beneficiaries of the increase in electronic bills delivered," Campbell said.

CheckFree's deal follows up its December acquisition of e-billing software provider BlueGill Technologies Inc. for $280 million. BlueGill Technologies, already a TransPoint software partner, will provide immediate support