BA Merchant Services, the merchant processing arm of BankAmerica Corp., has announced its first acquisition deal since going public last year.
The San Francisco-based company said it would buy a 4,200-merchant portfolio with an $850 million annual charge volume from First Data Corp. by the close of this quarter.
Terms were not disclosed, though some estimates put the portfolio price between $7 million and $10 million. The customers are mainly small, California-based merchants.
"These customers are a known geography, and some are (BankAmerica) customers," said Sharif Bayyari, president and chief executive officer of BA Merchant Services.
"This was a natural fit for us, in our own backyard."
Industry observers said the acquisition is consistent with First Data's wish not to be seen as a competitor to merchant-acquiring banks that it also allies with.
Experts also said the move is consistent with BA Merchant Services' desire to serve merchants that also have relationships with Bank of America.
Nabanco, a subsidiary of First Financial Management Corp., Atlanta, originally acquired the portfolio from Security Pacific Corp. in 1989. BankAmerica acquired Security Pacific in 1992, and First Data acquired First Financial Management in 1995.
Nicholas Ferrante, president and chief executive officer of Ferrante Financial Services Inc., Chatsworth, Calif., said the Security Pacific portfolio was among the first merchant portfolios ever sold by a bank.
"Part of First Data's strategy is not competing with the customer," said Marc Abbey, principal, First Annapolis Consulting, Linthicum, Md.
"BA Merchant Services focuses on merchants with whom they have bank relationships."
Another reason for the sale, Mr. Abbey said, was that "small businesses with relationships with Bank of America were of greater value to Bank of America" than to Hackensack, N.J.-based First Data.
Gregory Gould, vice president, Goldman, Sachs & Co., said a five-year noncompete agreement between Nabanco and BA Merchant Services expires next month, allowing BA Merchant Services to court merchants in the portfolio.
Those merchants, Mr. Gould added, are "not material to First Data but significant to BA Merchant Services."
Mr. Bayyari said the merchants will remain on First Data's processing platform for a year or two as BA Merchant Services consolidates the systems.