STRATEGIC PARTNERS
Concord EFS and Star Systems have entered into an agreement that will create an immense EFT network with 195,000 ATMs, 800,000 POS locations and 132 million cards.
November 1, 2000
The EFT industry is one step closer to a national super network with the announcement that Concord EFS, Inc.and Star Systems, Inc. have entered into a merger agreement which will make Star a wholly-owned subsidiary of Concord.
Memphis, Tenn.-based Concord owns the MAC EFT network, which provides services to more than 3,300 financial institutions mostly in the Northeast and Midwest. Maitland, Fla.-based Star serves 3,500 financial institution members primarily in the West, Southwest and Southeast. Combined, the networks will have a presence in 31 states plus the District of Columbia.
Concord President Edward Labry mentioned Star's status as an industry leader in PIN-based debit transactions, noting that a whopping 40 percent of the 2.4 billion transactions processed by Star in 1999 were payments made by Star cardholders at an estimated 500,000 POS locations. With an additional 300,000 MAC-branded POS locations, the merged network will become a dominant player in debit.
"This merger is evidence of our belief in the significant potential for growth in PIN-based debit transactions," Labry said. "Combining the MAC and Star networks will produce a national debit network with broad geographic coverage, improved efficiencies and new online consumer products and services."
He added, "Going forward, we believe that the large debit card base resulting from this combination will help fuel growth in PIN-secured payments both at the point of sale and via the Internet, producing further benefits for financial institutions and retailers nationwide."
The two will also unite their ATM networks. More than 136,000 ATMs and 80 million cards carry the Star brand. The MAC network, which processed 1.9 billion transactions in 1999, has 52,000 MAC-branded ATMs and 52 million cards, plus an additional 7,000 machines currently branded Cash Station but transitioning to the MAC brand in the coming months. Concord completed its acquisition of Chicago-based Cash Station in August.
In comparison, the nation's third-largest EFT network, Woodcliff, N.J.-based NYCE, has 35,500 ATMs, mostly in the Northeast and Midwest. NYCE has 2,300 financial institution members, 45.9 million cards and 215,000 POS locations.
Ronald Congemi, president and CEO of Star Systems, called the merger "a good match of product lines and strategies," noting Star's strength in branded network access services and Concord's dominance in ATM processing services.
Commenting on the companies' respective strengths, Labry said that Star has "traditionally been more of a visionary" in creating new products and services for its members, while Concord has earned a reputation for its "aggressive sales and marketing."
In connection with the closing of the merger, which is expected to be completed in the first half of 2001, Concord will issue 24.75 million shares of common stock for all outstanding shares of Star Systems' common stock. Based on Concord's Oct. 6 closing price, the deal is worth roughly $850 million.
Since Star is not an acquirer, there will be "no margin issues, only an expansion of margins," Labry said.
According to a release issued by the two companies, the transaction will be non-dilutive in the first year and accretive in future years.
Executives of both companies say that they expect that both the Star and MAC network brands will coexist for some period of time. "Both networks have developed many brand franchises in their respective regions among financial institutions, merchants and consumers, and there are a number of ways we can make the most of these strengths," Congemi said.
