First Data Corp. has completed its acquisition of Card Establishment Services Inc., one of the top three providers of transaction services to merchants.
The transaction set a record for a merchant processing company, with one of the highest prices paid for any credit-card-related business. It included payment of about $520 million in First Data stock to CES shareholders and the repayment of approximately $76 million of CES bank debt.
After the close of the deal, $125 million of CES debt remains outstanding.
Ric Duques, First Data's chairman and chief executive, cited the Melville, N.Y.-based company's "fully integrated back-office processing systems" as a reason for the purchase.
Thomas Staudt, president and chief operating officer of CES, has since left the company. He has been replaced by a "management team" for finance, systems, and operations that will report to Roger Peirce, president of First Data's Electronic Funds Services unit.
John C. Elliot, chairman and chief executive of CES, will work at First Data in an advisory role.
CES processes about 460 million transactions a year for 205,000 merchant outlets.
This acquisition, along with the pending purchase of Envoy Corp.'s merchant services unit, will make First Data one of the world's largest merchant processors. First Data has agreed to pay between $156 million to $177 million for the Envoy unit, and expects the deal to be completed by the end of this month.
In November, First Data launched its Merchant Bank Alliance program, which allows First Data clients to utilize merchant relationships associated with CES' current merchant business.
The 1,000 CES employees, including a sales force of 450 who are seen as critical to selling the alliance concept, will double the size of Mr. Peirce's group. All have been told they will keep their jobs.
The Hackensack, N.J.-based company has reached letters of intent with U.S. Bancorp, Bancomer, and Norwest Corp., and said it was in discussions with other banks.