Nova Information Systems Inc. has jumped back into portfolio acquisitions with a splash.
The Atlanta-based merchant processor said it had signed a letter of intent to acquire Richmond, Va.-based Crestar Bank's $1.8 billion portfolio.
The planned deal is a coup for Nova, which has been quiet since its mega-acquisition of First Union Corp.'s $4.6 billion portfolio in 1996.
Terms of the agreement, which is expected to close this month, were not released, but experts said a conservative cost estimate would be $15 million.
The Crestar portfolio of 7,500 merchants is No. 42 in the country, according to The Nilson Report, Oxnard, Calif. Nova would jump into the No. 7 spot, overtaking Fifth Third Bank of Cincinnati and First Bank System Inc., Minneapolis.
Nova had slipped in 1996 to ninth from eighth in 1995.
Industry experts said the planned acquisition is a sign that Nova can leverage its technological expertise to win the shrinking number of prime portfolios away from bigger competitors like First Data Corp.
"The strategic impact is greater than the numbers," said Franco Turrinelli, research analyst at William Blair & Co., Chicago. "It demonstrates Nova's ability to compete for and win a portfolio of this size. It reestablishes Nova's forward momentum in a consolidating industry and in Nova's acquisition program."
Mr. Turrinelli added that the portfolio would increase Nova's processing volume by 10%. With Crestar, Nova would have 95,000 merchants and about $14.8 billion of annual sales volume.
"It's the classic Nova transaction of a bank looking for a technology partner," said Edward Grzedzinski, Nova's CEO. "It enhances our customer base and ability to win new business through sales and through (Crestar) branches."
The principal subsidiary of Crestar Financial Corp. has 500 branches in Virginia, Maryland, and the District of Columbia.
Before Tuesday's announcement, analysts had criticized Nova for not making enough acquisitions-a charge Mr. Grzedzinski rebutted, saying Nova acquired 22 community bank portfolios last year.
Crestar Bank spokesman Tony Mattera said the bank chose Nova because of its technological expertise.
"Selling our portfolio and working with them is a more efficient way to provide our merchants with these technologies," Mr. Mattera said. It is "a move to insure we can continue to provide the service our customers expect."
Paul Martaus, president of Martaus & Associates, Clearwater, Fla., said the agreement puts Nova "back into the hunt."
"The marketplace was convinced that First Union was the only deal they could do like that," he said. Also, he said, some banks may have feared they would be competing with First Union, which as a part of the deal, acquired a 30% equity stake in Nova.
In 1992, Nova acquired MBNA Corp.'s $1.4 billion retail merchant portfolio, and in 1994 it bought Bank of Boulder's $2.5 billion portfolio.
