On Tuesday, the same day that stockholders of both companies approved First Data Corp.'s deal for Concord EFS Inc., the Justice Department filed court documents to set a schedule for a lawsuit to block it.
The Justice Department, which filed the suit last week, asked Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia for a preliminary injunction hearing on Jan. 5. A spokeswoman for the Justice Department said that the judge will make the final determinations on the schedule.
In a separate motion, the government asked Judge Collyer to keep under seal the sensitive information it obtained on network competition during its Hart-Scott-Rodino investigation. The suit alleges that the deal, in which Concord's Star network would be merged with First Data's NYCE, would create a PIN debit processor so dominant that it would violate antitrust laws.
The complaint suggests that if First Data sold NYCE, the dominant PIN debit network in the Northeast, the Justice Department would approve the Denver company's deal for Concord.
Charles T. Fote, First Data's chairman and chief executive officer, has maintained that divesting NYCE is out of the question. The Oct. 24 issue of The Denver Post quoted him as saying, "If you're asking me if we'd sell NYCE, the position is no, because that's the only position we've ever had since we filed the [acquisition] papers."
Under the pact the two companies signed in April, First Data can walk away - and pay Concord a $25 million penalty - if the transaction cannot be completed by Jan. 31.
Even though the deal cannot be completed until the lawsuit runs its course, the companies decided to conduct votes in special shareholder meetings, which were scheduled before the complaint was filed.
"One of the conditions of the merger is that both companies obtain shareholder approval, so we thought it was important to move forward with the shareholder vote as planned," Melinda Mercurio, a Concord spokeswoman, wrote in an e-mail interview Tuesday.
Concord said that 98.5% of the votes cast - representing 63.3% of its outstanding shares - were in favor of the deal. First Data had not released the exact results of its vote by press time.
The companies worked with the Justice Department for about six months to get clearance for the deal under the Hart-Scott-Rodino Antitrust Improvements Act, but the Justice Department turned them down on Oct. 23. The complaint, filed on Thursday, said that combining Star, the No. 1 electronic funds transfer network, with NYCE, the No. 3 EFT network, would give First Data overwhelming market power in PIN debit processing.
Robert Dodd, an analyst at Regions Financial Corp.'s Morgan Keegan & Co. in Memphis, who attended the Concord shareholder meeting, said that only six questions were asked during the meeting and the vote was quickly completed.
There was some mention of the provision of the contract that says that First Data must make its best effort to complete the deal, or else Concord can sue, Mr. Dodd said.
According to Mr. Dodd, Richard P. Kiphart, Concord's chairman, said that the Memphis company was "getting competent legal representation and reviewing all its options." That remark "could be interpreted to say they might consider a lawsuit at some point, but I wouldn't say it's imminent."
Mr. Dodd, who said Morgan Keegan does not own stock in either Concord or First Data, asked a rhetorical question: "Quite apart from best effort, what's better for First Data? Will they make more money and be a better-situated company having NYCE [and not buying Concord] or disposing of NYCE and merging with Concord? It seems to me that First Data would be better off merging with Concord and disposing of NYCE. It seems the most sensible course of actions."
