The restructuring moves that Tandy Corp. announced this week could be a bonanza for SPS Transaction Services Inc.
SPS agreed to take over Tandy's consumer credit business, including the private-label card accounts of its 6,600-store Radio Shack retail chain.
Tandy said its sales of several portfolios within Tandy Credit Corp. would yield cash infusions totaling more than $700 million by the end of this year.
The Fort Worth-based electronics retailer also announced the sale of service contracts, the closing of more than 200 Video Concepts and McDuff stores, and an increased share-repurchase program - all aimed at "enhancing shareholder value and our future earnings potential," said Tandy chairman John V. Roach.
SPS, which had been supporting Tandy's credit operation since 1986, will take a more active role in card issuance and will substantially increase its ownership of receivables.
The Riverwoods, Ill., payment services company is thus certain to raise its standing as a private-label processor against competitors owned by the likes of General Electric Co., Household International, and Citicorp. SPS was servicing 3.4 million accounts and had $739 million in outstandings at the end of the third quarter of 1994.
SPS inked two agreements with Tandy: a long-term contract to issue Computer City and Incredible Universe cards, which are associated with two Tandy-owned chains; and a letter of intent for the future issuance of Radio Shack and McDuff cards, pending regulatory approvals and other conditions.
Hurley State Bank, SPS's South Dakota subsidiary, got $230 million of Computer City and Incredible Universe receivables. Tandy said it has been paid $85 million in cash and should get another $625 million as the rest of the agreement unfolds.
The Radio Shack and McDuff accounts, with about $450 million of receivables, are expected to be transferred by early in the second quarter, according to SPS and Tandy spokesmen.
The new contract will encompass card issuing, application processing, transaction processing, billing, customer service, and marketing support.
"Tandy Corp. is a key part of our private-label business," said Robert L. Wieseneck, SPS president and chief executive officer. "These new agreements will allow both companies to focus on long-term marketing strategies to increase card sales in support of Tandy's aggressive plans for sales growth."
Tandy vice president Ronald L. Parrish called SPS "a highly satisfactory and logical choice to assist Tandy's retail growth plans, of which private- label credit plays a very important role."
"Tandy anticipates that its customers and retail stores should notice an insignificant difference in their future relationships with SPS," Tandy said in its announcement of the "reengineering and restructuring of its assets."
Other clients of SPS, a onetime Sears, Roebuck and Co. subsidiary that is now majority owned by Dean Witter, Discover & Co., include Goodyear, OfficeMax, Walden Books, and several Sears affiliates.
SPS's share price was up $1.75 Tuesday, the day of the Tandy announcement, to $28, while Tandy's rose 62.5 cents to $50.625. SPS stock stood at $29.50 early Thursday afternoon.
