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.