Global payment solutions provider Total System Services, Inc. or TSYS (TSS) Tuesday announced a definitive agreement to acquire NetSpend (NTSP), a provider of reloadable prepaid debit cards, in an all cash transaction valued at about $1.4 billion. NetSpend shareholders will receive $16.00 in cash for each share. NetSpend shares rallied in the extended trading session.
The deal is expected to close in the middle of 2013. TSYS expects the purchase to be accretive to its reported earnings per share for the first 12 month period following closing, excluding one-time acquisition related fees and expenses.
NetSpend has an extensive distribution network. This enables consumers to purchase prepaid debit cards at more than 62,000 distributing merchant locations, such as retailers, check cashers, convenience stores and grocers.
The firm is also a leading provider of corporate payroll card solutions, and has a direct distribution channel to reach consumers through online, mobile and direct marketing sources. NetSpend currently serves more than 2.4 million accounts, 46 percent of which are direct deposit accounts. It has more than 500 retail distributors and more than 130,000 reload locations.
Philip Tomlinson, CEO of TSYS, said, "The NetSpend acquisition...enables us to meet our strategic goals of diversifying our business, being a more innovative payment solutions provider and expanding our role within an area of payments that is expected to grow at a 20% annual rate over the next four years. The acquisition also complements our already strong presence in the prepaid processing space."
Houlihan Lokey is the exclusive financial advisor, and King & Spalding is acting as legal counsel, to TSYS in connection with the deal. For NetSpend, BofA Merrill Lynch is acting as exclusive financial advisor and Fried Frank is acting as legal counsel.
TSS closed up around 1 percent on Tuesday at $23.48, but dropped 1.8 percent in the extended trade.
NTSP, which closed lower by 3.2 percent at $12.29, surged 29.5 percent in the extended trade and was at $15.91.
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