STRATEGIC PARTNERS
January 2, 2002
DENVER -- First Data Corp. (NYSE: FDC) will take a 60-65 percent equity interest in the NYCE Corporation, owner of the NYCEelectronic funds transfer network.
NYCE, which services 48 million cardholders through 44,000 ATMs and 270,000 point-of-sale locations, will continue as a separate entity.
Terms of the transaction were not disclosed. The transaction is expected to close during the second half of 2001, subject to regulatory approvals and other closing conditions. First Data anticipates that the transaction will be non-dilutive to earnings in the first year and accretive in future years.
Four of the current NYCE shareholders -- Citibank, FleetBoston Financial, HSBC Bank, Inc., and J.P. Morgan Chase & Co. -- will continue as equity partners, along with First Data.
Dennis F. Lynch, president and chief executive officer with NYCE, said that the decision of the four financial institutions to remain as equity participants validates the evolution of NYCE's business model. "Significant and consistent financial institution governance and guidance means that our network will continue to be shaped by the views and input of network participants -- a key benefit that will clearly differentiate our new entity from other leading real-time payments companies," he said.
"This transaction will accelerate our opportunities in the emerging, but fast-growing online, point-of-sale debit market," said Charles T. Fote, president and chief operating officer of First Data Corporation. "This transaction builds upon First Data's successful alliance strategy of partnering with banks to deliver premier payment services. By working with the other owners -- many who already partner with First Data for processing services -- we can propel online debit into broader real-time payment markets."
The NYCE transaction also builds upon First Data's current debit business. First Data is the leading offline debit processor and is a significant processor of online debit POS transactions in the U.S. Once this combination is completed, First Data will process well over one billion online debit POS transactions each year. Since 1992, First Data also has operated one of the largest debit switches in Australia.
"Combining First Data and NYCE's financial institution participants can broaden acceptance of online debit into newer merchant segments -- beyond the petroleum, convenience store and supermarket segments where debit cards are typically used today," said Fote.
Perhaps the most significant advantage gained by First Data will be the ability to send POS transactions directly from POS terminals to card issuers without using third parties. This would effectively cut out not only the other EFT networks but also Visa U.S.A., MasterCard International and American Express Co.
The NYCE brand will be retained, and Lynch will remain as president and CEO of NYCE.
