Electronic Payment Services Inc., a venture of five major banking companies that was a continual subject of takeover speculation, has found a buyer willing to part with about $1 billion.

Concord EFS Inc., a point of sale processing specialist, agreed to pay that amount in stock for the Wilmington, Del.-based EPS, which is best known as the owner of MAC, the third-largest of the regional automated teller machine networks.

Along with MAC, Concord would gain control of one of its direct competitors, Buypass Corp., and would increase its annual transaction total by 2.7 billion, enhancing the economies of scale that are critical to profitability.

With EPS as a wholly owned subsidiary, Concord would vault into the top ranks of electronic transaction processing, in a league with companies like First Data Corp., National City Corp.'s National Processing unit, and Bank One Corp.'s Paymentech affiliate.

Pending regulatory and shareholder approvals, the owners of EPS-Bank One Corp., First Union Corp., KeyCorp, National City, and PNC Bank Corp.-will come away with 32.31 million shares of Concord stock, worth $1.02 billion when the market closed Tuesday.

Concord's share price was up $3.0625 Tuesday, to $31.50. That increased the value of the deal from $919 million at the market's close Monday, when it was announced.

The news caps a long turnaround for EPS, which grew out of the MAC network that Philadelphia National Bank started in the 1970s. PNB's successor, CoreStates Financial Corp., turned it into a joint venture in 1992, but over the next few years it lost focus, as was typified by an ill- fated smart card project, said EPS president and chief executive officer Richard N. Garman.

Mr. Garman, a former investment banker, directed the company back to basics, significantly improved profitability, and was openly seeking some form of recapitalization, whether through a takeover or initial public offering.

He said the Concord transaction made more sense than an IPO because of the companies' overlaps and potential synergies that "will enhance the products we offer today (and) open new markets for our services."

"The principal object we had was to dramatically grow the business," Mr. Garman said. "This is a great opportunity for the company, for all the people, and our clients to continue to ramp up what we're doing."

Concord, based in Memphis, ranked 15th in bank card processing volume last year, according to The Nilson Report, which said half its 250 million transactions this year will have come from supermarkets.

The company performs a full service that includes settlement of payments through a subsidiary, EFS National Bank. Concord is second only to EPS' Buypass in processing electronic benefits transfers, the automated replacements for welfare checks, food stamps, and other government payments.

In number of ATMs, EPS' MAC ranks behind Honor of Florida and Star of California. EPS drives more machines itself-32,000-than any other network, and it ranks first in ATM transactions processed through its central switch.

David Robertson, president of The Nilson Report in Oxnard, Calif., said Concord's purchase will put it in position to compete against the likes of First Data, Paymentech, and Nova Corp. of Atlanta, which earlier this year sealed a $1 billion-plus deal for another merchant processing powerhouse, PMT Services of Nashville.

"It's important that they get a larger processing platform," Mr. Robertson said. "It was a move that was needed for that company to compete aggressively on the credit card processing side of the business."

Concord executives said they expected the acquisition to be immediately accretive to earnings. Their company netted $43 million net in 1997, up 60%. EPS recorded net income of $18 million, up 61%, according to Concord's filing Monday with the Securities and Exchange Commission.

'This merger allows the two companies to combine their experience and expertise in providing processing solutions to the fastest growing payment niches including supermarkets, oil and gas, and convenience store locations," said Concord president Edward A. Labry 3d.

"Traditionally Concord has been a marketing and service company focusing on growth while EPS has tremendous processing capabilities, said Concord chairman and CEO Dan M. Palmer. "Going forward we can broaden each of our markets by expanding into new industry segments."

Concord gains a chance to provide "full integrated processing" to EPS customers, said Pawan K. Malhotra, a senior analyst at Legg Mason Wood Walker. The deal is less aimed at reducing cost than at "increasing revenue growth for both companies combined."

But Concord stands to save through eliminating redundancies such as the fees both companies now pay to the credit card associations and for gateways to the various other ATM networks.

Among the synergies is that EPS has relationships with 2,300 financial institutions, a big potential audience for Concord's credit and debit card services to merchants. Concord services 9,000 supermarkets, EPS 15,000.

Robinson-Humphrey Co. analyst Brent Wouters said the transaction bears some risk for investors. Platform conversions can be tricky, and the bigger company will have to sustain growth in a tough competitive environment.

Mr. Wouters also questioned how the deal benefits the five EPS-owning banks, which are not in the business of holding stock. "I've got to believe the banks over time would be sellers," depressing the value, Mr. Wouters said.

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