First USA Paymentech Inc. has acquired Checkfree Corp.'s merchant portfolio. The customers include several Internet service providers, cellular communications companies, utilities, and insurance companies.

Terms of the sale were not disclosed. The 200 merchants affected generated $847 million of volume last year on 42 million credit card and automated clearing house transactions.

The acquisition allows the First USA Inc. subsidiary, No. 3 in processing card transactions for merchants, to expand its growing specialty in recurring bill payments.

Atlanta-based Checkfree, meanwhile, intends to concentrate on more- profitable core businesses in which it is building economies of scale, including electronic bill payment and presentment, home banking, and brokerage processing.

"The type of processing we did was a type of business Paymentech is adept at doing," said Checkfree spokesman Matthew Lewis. Paymentech "made it attractive as a purchaser and as an ongoing business partner."

Checkfree signed a two-year agreement to refer merchant processing prospects to Paymentech.

"It is a smart move for Checkfree," said Stanley W. Anderson, president of Anderson and Associates, Arvada, Colo. "The name of the game is volume, and (Checkfree) needs critical mass.

It was not practical or cost-effective for Checkfree, with just 200 merchants, to keep pace with the "increased technological demands" that MasterCard and Visa are imposing on merchants "to capture and move more data electronically," Mr. Anderson said.

"Paymentech is No. 1 in (processing) mail-order and telephone-order remote payments," said David Robertson, president, The Nilson Report, Oxnard, Calif. "First USA is clear it wants to be in this business and ... wants to corner the market on payment transactions where the card is not present."

Last year Dallas-based Paymentech processed $36.5 billion of bank card sales. Pamela H. Patsley, president and chief executive officer, said portfolio acquisitions are essential for its growth.

In 1995 the company acquired two New Hampshire companies, Litle & Co. and DMGT Corp., that specialize in direct marketing transactions. The Checkfree portfolio "is our first acquisition that fits with our New Hampshire platform, servicing direct-response" transactions, Ms. Patsley said.

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