Nova Information Systems Inc. and Boulder Bankcard Processing have become the latest merchant processing companies to announce a merger agreement.

Nova said last week that it would acquire Boulder Bankcard to become the 11th-largest merchant servicer of bank card transactions, with $6 billion of annual transaction volume, servicing more than 50,000 merchants.

The price of the acquisition was not disclosed.

It comes on the heels of the Nov. 2 announcement by First Data Corp. that it had agreed to acquire Card Establishment Services Inc. for $500 million of stock plus assumption of debt -- a record price for a merchant processor and an indication that the trend toward consolidation and economies of scale is still playing out.

Melville, N.Y.,-based CES is the third-largest of the merchant industry's big three, behind Nabanco and National City Processing Co.

They are followed by a "second tier" of mainly bank-operated merchant businesses, including those of BankAmerica Corp. and First Bank System Inc. Such banks seem to be recommitting to the merchant business after several years of market-share declines.

Atlanta-based Nova, currently No. 19, according to The Nilson Report, would climb eight places after absorbing 31st-ranked Boulder Bankcard.

The Nilson Report, the newsletter based in Oxnard, Calif., said that in 1993 the 10 largest acquirers of merchant transactions settled $201.82 billion of the $310.63 billion in bank card purchases, and processed 69% of the 4.36 billion transactions.

"The trend toward domination of the market by a few large organizations is moving even faster on the acquiring side of the U.S. bank card business than on the issuing Side," according to the newsletter's April issue.

"We set a goal, when we started our company in early 1991, to reach the top 10 by 1995," said Edward Grzedzinski, chief executive officer of Nova. "We think [the merger with Boulder Bankcard] puts us into a good position to break into the top 10."

"Whoever is in the top 10 or the top 20, my perception is they're in there for the long haul," said Steve Demaree, senior vice president with First Tennessee Bank, "doing whatever they have to do to stay in the business," including mergers and acquisitions.

Boulder Bankcard, a division of Bank of Boulder, Colo., will continue to operate there as a subsidiary of Nova. Terry Hannum, executive vice president of the bank, will become president of the merged company and report to Mr. Grzedzinski.

Mr. Hannum will have the task of melding two different growth strategies. Nova has more than 200 "alliance partners," mostly community banks. Boulder's customers are 24 independent service organizations and 40 credit card agent banks. It has been endorsed by more than 100 associations, such as restaurants and automotive dealers.

"This merger is very complementary, due to our entirely different distribution channels," Mr. Hannum noted. "We recognize the importance of keeping both organizations focused on the way they have done business successfully in the past."

Over time, Nova will make its line of products and services available to Boulder's clients. Nova's operations center in Knoxville, Tenn., will continue to exist, but the companies said they will try to eliminate any overlaps, though the sales and marketing thrust of each entity will remain separate.

Boulder Bankcard started in 1981 serving regional petroleum and convenience store chains. It added independent sales organizations in 1986 and agent banks in 1993, growing rapidly under Bank of Boulder, a $100 million-asset bank.

William Westervelt, a principal at First Annapolis Consulting, agreed the merger is an indication of further consolidation in the business to gain scale. "Nova really hasn't had an acquisition for a while, and Boulder has been on the market for a while."

Nova, originally called Innova, was co-rounded in 1991 by Mr. Grzedzinski and William Kinard. Mr. Kinard came from National Data Corp. and recently went to work for First Data.

Nova raised more than $30 million in venture capital and has accelerated its move up the market-share rankings through acquisitions.

Mr. Grzedzinski indicated Nova is considering more mergers and acquisitions, and said other companies are likely to do the same.

"This is a sales business," he said. The mergers "start to put us on a scale that allows us to compete with virtually everyone. Ultimately, our goal is to reach the top five."

In working with banks such as Bank of the West in Walnut Creek, Calif., and First Alabama Bank, Nova has tried to form mutually beneficial relationships.

"We have believed from the beginning that it's a mistake for banks to exit the business entirely," Mr. Grzedzinski said. "We bring a solution to banks that allows us to focus on technology and the back office while banks focus on the relationship management side."

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