News

First Data to divest NYCE; Concord merger now looks likely

December 14, 2003

DENVER and MEMPHIS, Tenn. - First Data Corp. (NYSE: FDC) and Concord EFS Inc. (NYSE: CE) have announced a proposed agreement with the U.S. Department of Justice (DOJ), eight states and the District of Columbia on terms that will allow the companies to complete their proposed merger by the end of the first quarter 2004.

A key part of the proposed agreement calls for First Data to divest its 64 percent ownership of the NYCE Corporation and its NYCE network. In addition, First Data has agreed to hold NYCE as a separate unit pending the divestiture.

In connection with the DOJ settlement, the two companies also agreed to new financial terms, with a new value of approximately $6.9 billion, based on First Data's closing price of $39.30 on Dec. 12. The revised merger agreement also extends the original Jan. 31, 2004 end date to April 30, 2004 to allow sufficient time to obtain the necessary shareholder approvals of the revised terms.

According to a statement issued by both companies, the revised agreement increases transaction certainty by eliminating many, but not all, conditions to completing the merger. The boards of both companies have approved the revised agreement.

Upon completion of the transaction, the combined company will have approximately $10 billion in annual revenues with more than 31,000 employees worldwide.

"This settlement removes uncertainty and allows the companies to proceed with achieving the benefits of this merger," said First Data Chairman and CEO Charlie Fote. "We also believe the new financial terms represent a fair value for both sets of shareholders."

According to earlier news reports, the DOJ on Dec. 12 rejected an earlier settlement offer by First Data. The DOJ had been expected to present its antitrust case against the proposed merger beginning today. (See related story DOJ rejects First Data offer as sides prepare to argue Concord merger)

Under terms of the new agreement with Concord, First Data will exchange 0.365 First Data common shares for every Concord common share. At Dec. 12's closing price of First Data stock, the transaction was valued at $14.34 for each common share of Concord. This exchange ratio represents a reduction from the original exchange ratio of 0.40 shares.

To complete the transaction, First Data will issue approximately 175 million common shares to Concord shareholders. Upon completion of the transaction based on the current shares outstanding, Concord shareholders will own approximately 19 percent of the outstanding shares of the combined First Data/Concord. The exchange of shares in the merger is expected to qualify as a tax-free reorganization, allowing Concord shareholders to defer any gain on their shares for U.S. income tax purposes.

The impact of the transaction in total to First Data's earnings per share depends on the timing of realizing the anticipated synergies, which is dependent on the closing date of the merger and the timing of the divestiture of NYCE. This could result in a slightly dilutive impact to the company's 2004 earnings, prior to restructuring and integration charges.

It is expected to be accretive thereafter. The company expects to generate cost savings of approximately $205 million in 2006.

The transaction is subject to necessary shareholder approvals. Closing is expected sometime in the first quarter of 2004.