RealTime IT News

First Data Buying Concord EFS for $7 Billion

First Data Corp. is acquiring Concord EFS Inc. , a company specializing in transaction processing, for close to $7 billion in stock. The combined entity, the companies said, will provide electronic payment services to banks, merchants and consumers.

First Data already owns Western Union and has a majority interest in the NYCE automated teller machine network. The purchase of Concord will enable First Data to consolidate its ATM interests, as Concord owns the STAR, MAC and Cash Station ATM networks. First Data is already the country's leading processor of credit card transactions.

First Data will exchange 0.40 of its shares for each Concord share, which will give Concord's shareholders approximately $13.87 per share. First Data says it will issue close to 200 million common shares to Concord shareholders, which would give them around 21 percent of the combined company. The new company is expected to have annual revenues of close to $10 billion and more than 30,000 employees.

First Data says the deal will lead to $230 million in cost savings and should not impact the company?s earnings per share in 2004. Upon news of the deal, Standard & Poor's Ratings Services said it does not expect the acquisition to have an impact on First Data's ratings or outlook. The merger is consistent with First Data's strategy of expanding its product and client base and leverage its existing processing capabilities. Current ratings continue to reflect Standard & Poor's expectation that First Data will maintain a strong financial profile and ample financial flexibility.

"This is a significant step in developing an open and flexible electronic payments system that will foster competition to the benefit of consumers, merchants and banks," First Data CEO Charlie Fote said, adding that "our transaction with Concord and its STAR network will enable First Data to provide its customers with more choices in products and services."

Concord says it is bringing to the new company "scale and processing expertise in strategic growth markets such as supermarket and petroleum, along with the national debit presence of the STAR Network," according to Dick Kiphart, Chairman of Concord, in a company statement.

"Combining First Data's merchant point-of-sale presence and global processing capability, Concord's real-time payments expertise and capabilities, and the STAR network, will provide customers with the most innovative and cost effective solutions for all of their electronic payment needs," Kiphart added.

One reason for the deal at this time may have been that Concord is said to be in danger of potentially lucrative contracts with banks, which may or may not renew their contracts for ATM services. Concord's stock price has been under pressure for months.

First Data also is facing challenges and just last month it lost one of its main customers Bank One Corp. , which announced it would be moving to Total System Services Inc. for its credit-card processing services beginning at the end of 2004.

First Data's Western Union unit is said to be losing market share, prompting some concerns about its future growth prospects.