News

DOJ rejects First Data offer as sides prepare to argue Concord merger

December 11, 2003

WASHINGTON - First Data Corp offered U.S. antitrust authorities on Dec. 11 a deal aimed at resolving objections to its proposed purchase of Concord EFS Inc. -- but the offer was quickly rejected, sources close to the matter said.

With a trial in the case only three days away, representatives of First Data offered to divest part of its ownership stake in the NYCEnetwork to alleviate the concerns of antitrust lawyers at the Justice Department, according to unnamed sources cited in a Reuters report.

However, one source described the talks as "not dead," and said a settlement was still possible.

Antitrust lawyers have long predicted that the department will require a total divestment of the NYCE network before it would be willing to endorse the deal.

The DOJ is expected on Dec. 15 to try to block the deal, armed with testimony from large retail and financial companies. According to Reuters, the DOJ plans to call as witnesses before U.S. District Judge Rosemary Collyer managers and executives from Citigroup's Citibank unit, American Express Co., Safeway Inc., Kmart Holding Corp. and Fifth Third Bank, a part of Cincinnati-based Fifth Third Bancorp.

First Data spokeswoman Staci Busby declined to comment on a possible settlement offer. "We look forward to the opportunity to present our case starting Dec. 15 as we continue to believe the merger of First Data and Concord is pro-competitive," Busby said.

Concord did not return phone calls seeking comment, according to Reuters.

Concord shares rose sharply as word of a possible settlement circulated through the market. The stock closed up 12 percent, or $1.38, to $12.85 a share on Dec. 11.

Unless a last-minute settlement is accepted, lawyers representing the government and the two companies are scheduled to face off in a seven-day trial, with the government hoping to convince a federal judge that the $7.18 billion merger would harm competition in the fast-growing debit market.

The combination of First Data's majority interest in the NYCE network with Concord's Star, MAC and Cash Station networks would give the merged company control of about 70 percent of the PIN-verified debit card market, analysts say.

The DOJ has argued that the merger would lead to higher prices for PIN-base debit card transactions. Consumers used PIN debit to buy more than $150 billion in goods and services in 2002, according to Reuters.

Concord and First Data are expected to make the case that the merged company's PIN debit service would compete directly with the PIN debit operations of Visa and MasterCard and their signature-based debit cards in the same market.

The two sides are scheduled to complete their cases by Dec. 23. Concord and First Data are seeking to resolve the case ahead of a scheduled Jan. 31 deadline for consummating their merger.