Divestitures, Improved Business Picture Spur Rumors of National

National Processing Co., one of the nation's largest merchant processors, could be on the block by the yearend, according to several Wall Street analysts.

The Louisville, Ky., company's recent round of divestitures and its improving business operations make it attractive for buyers looking to enter the processing business, said Brock Vandervliet, an industry analyst at Keefe, Bruyette & Woods Inc.

"We believe there may be significant upside in the company's stock price," said Mr. Vandervliet in a note to his clients.

In Tuesday's market, National Processing stock rose 4.17% to $6.25. It has gained almost 10% in the last week.

If sold, the company could go for $12 to $14 a share, Mr. Vandervliet said.

Among the potential buyers could be National City Corp. of Cleveland, which owns 88% of the company.

Dan Shingler, a spokesman for National City, said: "We have said in the past, we would not consider buying back National Processing until the divestiture of some business lines was completed.

"Those divestitures are now complete, so we will ultimately consider what is the best ownership structure for that unit."

Other potential buyers include First Data Corp. of Omaha, the nation's largest merchant processor; Paymentech Inc. of Dallas; BA Merchant Services of San Francisco; and Marshall & Ilsley Corp. of Milwaukee.

Speculation that National Processing could be sold or bought back by National City is not new. When the company went public in 1996, its shares quickly zoomed from $16.50 to as high as $22.

Sale rumors surfaced after the company lost a major contract with Wal- Mart in 1996. They reemerged this year after Bank of America Corp. bought back its merchant processing subsidiary for 23 times its earnings.

Whispers that National Processing could go on the block this year have been fueled by the company's improving fundamentals and its divestiture of less profitable operations. It sold four processing lines in May.

Business operations are "turning a corner" in the right direction, said Mr. Vandervliet, who raised his year-2000 earnings estimate on the company Tuesday to 70 cents per share, from 57 cents.

"We believe National Processing's turnaround is well under way and remaining business lines are performing well," said the analyst, who also raised his stock target price to $8, from $7.50.

The full benefit of the recent divestitures will not be felt during this quarter, the analyst said.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER