Seeking to capitalize on changing consumer habits, First USA Merchant Services Inc. said it will acquire two leading companies that process credit cards for direct marketers.

Entering the First USA fold are Litle & Co. of Salem, N.H., which handles transaction processing for approximately 1,000 direct marketing firms, and Nashua, N.H.-based DMGT Corp., which provides this service for 700 companies.

Although the parties did not divulge the financial terms of the deal, an industry source said the combined value of the purchases could reach $100 million or more.

"These acquisitions are strategically as well as financially driven, reflecting our commitment to growth in the transaction processing business and to expanding within profitable segments of the credit card industry," said John C. Tolleson, First USA chairman and chief executive, in a statement.

First USA Merchant Services president and CEO Pamela H. Patsley said that direct marketing, which includes catalogue, mail, and telephone order businesses, has strong potential. She cited gains in electronic commerce and increased customer convenience as the primary factors in this trend.

First USA has had an alliance with Litle & Co. since 1993, serving as its link to MasterCard International and Visa U.S.A. It had no previous relationship with DMGT.

"We know their people well," said Ms. Patsley of Litle & Co. "Our credit people work well with their credit people."

Their addition would clearly give First USA a sizable chunk of the direct marketing industry. Together, Litle & Co. and DMGT processed $10.2 billion worth of Visa and MasterCard transactions in the year ended June 30.

About 58% of that amount was processed through First USA in connection with Litle.

"Between the two of them, they probably have at least 50% of the market share," said Paul Martaus, president of Martaus & Associates, a consulting firm in Clearwater, Fla. "It really puts First USA in a premier position in that industry."

Still, the industry is considered somewhat high risk, he said. "It's a non-card-present merchant location," he said. "You don't know whether the cardholders ordering it (merchandise) actually have the card. A lot of companies won't deal with it."

First USA has been in an acquisitive mode for two years.

In January, it acquired J.L. McKay Corp., a Portland, Ore.-based credit card software development company specializing in applications for the hospitality industry.

Other acquisitions and alliances have included MAGroup, an electronic draft capture technology company; NationalCard Processing Systems, which services the arts and entertainment industry; and Electronic Processing Source Inc., which services restaurants and hotels.

"If you don't like the competitive environment, just wait an hour, it'll probably change - someone will buy someone else," said Mr. Martaus. "Hardly a day goes by when someone doesn't announce a major joint venture."

First USA Merchant Services is the nation's fourth-largest provider of credit card authorization, clearing, and settlement services, handling credit card processing at more than 170,000 merchant locations for 600 companies. It processes over $20 billion annually in credit card sales.

First USA Merchant Services and First USA Bank are First USA Inc.'s two principal operating units. First USA Bank has more than 10.5 million credit cards and $13 billion in outstandings at June 30.

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