DENVER - First Data Corp. says it plans to gradually exit the official or cashier/teller-check and money-order business, following a strategic review. First Data will maintain check-processing services through its TeleCheck business
According to a news release, most of the official-check and money-order business will be terminated over a period of two to three years. The wind-down is expected to free up between $250 million and $300 million for "alternative uses," including acquisitions, share repurchases and other corporate purposes during 2007.
"A strategic review of our Official Check and Money Order operation highlighted the fact that the business is in a declining market and providing unacceptable returns on both assets and equity," said Ric Duques, First Data's chairman and chief executive. "We are commencing an orderly withdrawal from the business while honoring our commitments to customers."
While the company intends to serve existing business clients through the end of their respective contract terms, expiring contracts will not be renewed on a long-term basis. Client contracts representing approximately 60 percent of portfolio balances will expire in the next two years. During the wind-down period, the company will maintain sufficient assets to honor all contract requirements and outstanding payment instruments.
The company says it will provide an update about the costs associated with the business wind-down when it reports its quarterly results throughout 2007.
