MasterCard Inc. has agreed to acquire the prepaid-card program management operations of foreign-exchange group Travelex for at least £290 million ($458 million), bolstering its prepaid-business assets and increasing its presence outside the U.S.
MasterCard has reported improved performance of late, helped by higher spending on cards carrying its brand. It and larger rival Visa Inc. are insulated from credit problems arising from delinquencies because they don't lend to consumers. Instead, they make money from the fees they charge for each transaction used by the plastic bearing their logo.
The Travelex arm makes prepaid cards that can be used at cash machines or to make purchases at the point of sale. It also manages cross-border payroll, per-diem and expense-management prepaid cards for corporations.
Meanwhile, prepaid cards are a hot focus as large U.S. banks are considering them as a way to make up revenue that will likely be lost from federal restrictions on debit cards. That is because prepaid cards, which are preloaded with funds and used like debit cards, are exempt from restrictions in the Dodd-Frank financial-overhaul bill.
Under the Travelex deal, MasterCard could pay up to an extra GBP35 million if performance targets are met.
MasterCard expects the transaction to slightly reduce its earnings next year and start adding to the bottom line starting in 2013. It's expected to close in the first half of 2011.
MasterCard shares closed Wednesday at $250.64 and were inactive premarket. The stock has retreated 2.1% this year after surging nearly 80% in 2009.
