First USA Paymentech Inc. has made its largest acquisition of a merchant-processing portfolio since making its initial stock offering in March.

In its first such deal with a bank, the unit of Dallas-based First USA Inc. bought 10,000 merchant accounts with $700 million in annual credit card volume from Mercantile Bancorp., St. Louis.

Pamela H. Patsley, the unit's president and chief executive, called the Mercantile portfolio "solid," but said it lacked "significantly large merchants."

Financial terms of the transaction were not disclosed, but First USA and Mercantile said they agreed to a five-year alliance in which the bank will turn over to Paymentech all new merchants and the volume they generate.

With volume last year of $24.6 billion from 446 million transactions, First USA Paymentech is the third-largest merchant processor, behind First Data Corp. and National City Processing Co.

The merchant business of Paymentech, formerly known as First USA Merchant Services Inc., has grown mainly through acquisitions of portfolios from independent sales organizations, which serve as marketing agents of the big processors. "Buying a portfolio from a major bank holding company is a little different for us," Ms. Patsley said.

In First USA's largest merchant deal before the initial public offering, it bought a $1.2 billion portfolio last September from Mokarow, a Dallas- based independent sales organization.

Also last fall, the merchant services unit acquired Litle & Co. and DMGT Corp., two New Hampshire-based companies that process credit cards for direct marketers. Combined, the two handled annual MasterCard and Visa volume of $10.2 billion.

"We continue to review our businesses and products and ask, Are they meeting our expectations, adding value to our shareholders?" said John Beirise, group president of emerging markets for Mercantile. "We are taking action on those that do not."

As part of the deal, Paymentech has hired six Mercantile employees in St. Louis and one in Kansas City, Ms. Patsley said. Paymentech will open offices in those locations to service the portfolio.

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