Wall Street analysts have hailed First Data Corp.'s merger agreement with First Financial Management Corp., seeing in it the emergence of a definitive payment systems powerhouse.

The deal will make First Data "the preeminent provider in both card- issuer processing and merchant processing," said Steven S. Birer of Hambrecht & Quist in San Francisco. "No one else comes close."

He also viewed the hefty $6.7 billion, $90-a-share exchange price as - "not too high."

"As it stands now, the deal will not be dilutive to First Data's earnings next year," said Mr. Birer, who follows both companies.

Investors appeared cautiously optimistic, bidding up First Financial's share price Tuesday by xxxx to $81.75.

First Data's common stock closed at $55.625, down xxxx from Monday's close of $56.875, the contract price.

Like the rest of Wall Street, Mr. Birer said he was caught off guard by the announcement, though it was in keeping with widespread expectations of industry consolidation.

"I never in my wildest dreams thought these two would merge," he said. "I thought they would be the last ones left facing each other on the battlefield."

Ned Davis, an analyst with Oppenheimer & Co. in New York, warned of antitrust scrutiny.

He said the combined company would control 100% of the consumer money transfer business, as well as more than half of the credit processing market.

"If the Justice Department wanted to block Microsoft from acquiring Intuit, it would strike me as strange if they did not want to look into this deal on market dominance and pricing grounds," Mr. Davis said.

Opposition to the deal could come from three camps, he said: card- processing wannabes like telephone and technology companies; individual banks looking to keep a lid on prices for merchant processing services; and Visa and MasterCard, both seeking to maintain their historical influence and control over the payments business.

Hambrecht & Quist's Mr. Birer acknowledged the antitrust concerns but said the deal should pass muster with regulators. "Both these companies have made over 100 acquisitions in the past three years," he noted. "There may have to be some alterations to the deal, such as divesting some businesses."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.