Acquisitions Make Metavante Significant Player
The bidding for First Data Corp.'s NYCE, the second-largest electronic funds transfer network in the country, appeared last week to be won by Metavante Corp., capping off a month of corporate acquisitions that launched the company into the big leagues of financial services outsourcers.
Metavante, the wholly owned subsidiary of bank holding company Marshall & Ilsley, agreed to pay $610-million for NYCE, which provides electronic funds services for 2,200 financial institutions, about half of them credit unions. First Data will get $389-million for its 64% stake in NYCE, with four major banks, JP Morgan Chase, Citigroup, Bank of America and HBC, splitting the remaining $221-million for their minority shares. The deal, however, is not final because the minority shareholders have a 30-day right of refusal on the acquisition.
"When this acquisition is completed, we expect to have another piece of the payment services solutions at Metavante, which will exchange, route, and settle electronic payments on behalf of financial institutions to and from businesses and consumers," said Frank Martire, Metavante president and CEO, who helped build Fiserv into one of the leading financial services outsourcers during a decade with that firm.
Metavante already has a broad EFT business which includes processing and switching for PULSE Association's Wisconsin operation (formerly the Thyme network) and the Advantage network in South Dakota, ACH processing for 31,000 merchants, and driving for 9,000 ATMs.
The proposed NYCE acquisition came just days after Metavante agreed to acquire Advanced Financial Solutions, the popular Oklahoma City-based provider of lending systems for credit unions and the parent of Endpoint Exchange LLC, the fledgling national check exchange network with more than 4,000 financial institution participants.
And it comes just a few weeks after Metavante agreed to acquire Orlando, Fla.-based Kirchman Corp., a provider of transaction processing software for financial institutions.
The NYCE deal expands Metavante's role in the electronic payments market, where it already processes payments, but also gives the company its own branded network, according to Martire. It also gives the company an opportunity to cross-sell services and products to NYCE customers, he said during a conference call last week.
"We see great potential for the electronic side of the business," he said. "With NYCE, and Endpoint Exchange expanding our presence in the electronic side of the business; these new capabilities will allow us to do that."
"The acquisition of NYCE will give us a single source payment solution that is continuously requested by our customers," said Martire.
Metavante plans to retain the current NYCE management team and the NYCE name, said Martire.
For First Data, the sell-off of NYCE represents a somewhat less-than-glorious chapter to the company's brief ownership of the network. First Data bought its share in the network in 2001 for $353.1 million in cash and invested millions of dollars in integrating it and expanding the products and services it offered. But the company was ordered to divest its NYCE ownership by the Department of Justice, as part of an agreement to allow First Data to acquire Concord EFS, which operates a NYCE competitor, Star Systems EFT network.
Chip Swearngan, director of investor and media relations, said Metavante representatives plan to meet with representatives of the four minority shareholders of NYCE in the coming days to discuss the deal and listen to their concerns. "Three out of the four are already customers of Metavante today, with products and services that we provide. Our primary objective is that they remain customers of NYCE," he said.
The three corporate acquisitions, which cost about $1-billion, will transform Metavante into a giant outsourcer with more than $1-billion in annual revenues serving more than 8,000 institutions, rivaling Fiserv, in nearby Brookfield, Wis., as one of the biggest outsourcers for banks and credit unions.
It also renews questions of whether Marshall & Ilsley will try again to spin off the wholly owned subsidiary, which it planned to do but abandoned three years ago.